State legislators across the country continue to propose legislation aimed at addressing the ongoing effects of coronavirus on businesses. Here are some of the recent legislative developments:
In Pennsylvania, the Business Interruption Insurance Act, House Bill No. 2759, was recently referred to the House Insurance Committee. Similar to other proposed legislation that we’ve seen, this bill would construe an insurance policy that includes business interruption coverage to include among the covered perils all losses resulting from the Governor’s proclamation of disaster emergency, including due to a global virus transmission or pandemic. The proposed legislation would apply to insurance policies in force on the date of the proclamation of disaster emergency and that have been issued to an insured that has fewer than 100 employees.
Meanwhile, in New Jersey, legislators introduced Assembly Bill 4551, which authorizes insurers to offer a rider to a business interruption insurance policy, which includes, as a covered peril, coverage for global virus transmission or pandemic, or both. A statement to the bill notes that that the Insurance Services Office, ISO, has developed such a rider, but no states have yet approved the form.
DC has recently taken a different approach, enacting the Commercial Insurance Claim Tolling Emergency Act of 2020. The Act tolls the running of all time periods for policyholders to exercise rights under their policies, or D.C. law, during the period of a public health emergency and for ninety days thereafter.
Finally, legislators in New York introduced S8853/A10837, which would render null and void any clause or provision in a business interruption policy that allows the insurer to deny coverage based on a virus, bacterium, or other microorganism that causes disease, illness, or physical distress. The bill applies to businesses and not-for-profits covered by such a policy with fewer than 250 employees.
Although COVID-19 infections remain prevalent, and in many locations continue to rise, jurisdictions at the federal, state, and local levels are increasingly turning their attention to reopening the economy. As we have discussed in prior posts, reopening will present multiple challenges, including the threat to businesses that do reopen that they will face bodily injury claims from either employees or customers that contract COVID-19. Recognizing that the threat of litigation against companies may dissuade them from opening their doors, Congress is turning its attention to the issue of potential business indemnity for civil litigation involving such claims against companies. The Senate Judiciary Committee held a hearing on this topic on Tuesday. Senate Majority Leader Mitch McConnell has indicated that a broad liability shield for companies is a top Republican priority while Senate Democrats are expected to oppose such liability shields. Both plaintiff and defense attorneys, as well as other special interest associations, have also weighed in on the potential pros and cons of such a measure. Given the large volume of COVID-19 related lawsuits that have been filed, and are expected to be filed in the future, this is a significant issue that we will continue to monitor.
DTW 1991 Underwriting Limited has filed a motion to dismiss a case brought by Prime Time Sports Grill, a restaurant in Tampa that is seeking insurance coverage for its COVID-19-related losses. The insurer argues that Prime Time failed to allege a “direct physical loss of or damage to property” at its premises, and has therefore failed to plead a claim that is covered by the policy. Prime Time only alleges economic losses (i.e., business income loss) caused by COVID-19, which the insurer claims are potentially covered only if Prime Time can demonstrate “direct physical loss of or damage to property.” The insurer also takes issue with Prime Time’s allegation that it was forced to close due to orders from Florida’s Governor. On the contrary, says the insurer, one order encouraged restaurants to remain open and provide delivery, carry-out or curbside service – which Prime Time did. Prime Time’s response to the motion is due May 18.
As we noted at the beginning of April, New York is one of a growing number of states that has introduced legislation that would construe insurance policies that provide coverage for loss of use and occupancy and business interruption to include coverage for business interruption resulting from COVID-19. Unlike the bills introduced in many other states, which have gone untouched since they were introduced, Assembly Bill A10226 has twice been amended. Earlier this month, the bill was amended to provide that policies that expire during the period of declared state emergency due to coronavirus shall be subject to an automatic renewal at the current rate of charge. It also declared null and void any provision that would allow an insurer to deny coverage based on a virus, bacterium, or other microorganism, among other changes. On April 29, a second amended version of the bill was introduced; among other changes, the bill further provides that policies that insure against business income loss resulting from loss, damage, or destruction of property owned by others – including direct suppliers and/or receivers of the insured’s goods or services – shall be construed to provide coverage for contingent business interruption during the period of declared state emergency due to coronavirus. New York’s legislators, it seems, remain dedicated to seeing that businesses are able to recover COVID-19-related losses from their insurers.
South Carolina legislators are the latest to introduce a bill addressing business interruption coverage in the wake of COVID-19. The South Carolina bill is similar to those introduced in other states, but notably specifies that an insurer may not deny a claim for loss of use and occupancy or business interruption with respect to COVID-19 – including denials on account of (a) COVID-19 being a virus, even if the policy excludes losses resulting from viruses; (b) there being no physical damage to the property; or (c) orders issued by any civil authority, or acts or decisions of a governmental entity. In this way, the legislation anticipates (and rejects) potential arguments that would likely be raised by insurers in attempting to deny claims. The legislation also permits insurers to seek relief and reimbursement from the state, as we’ve seen in other states’ proposed bills.
State lawmakers continue to propose legislation designed to allow businesses to recover COVID-19 losses under their insurance policies. In addition to those mentioned in our previous update, Pennsylvania lawmakers have now put forth two bills regarding business interruption. The first, like many we’ve seen, provides that an insurance policy that insures against loss or damage to property, which includes the loss of use and occupancy and business interruption, shall be construed to include coverage for business interruption due to global virus transmission or pandemic. The second establishes a COVID-19 Disaster Emergency Business Interruption Grant Program, which would award funds to businesses that have submitted an insurance claim under a business interruption insurance policy and had their insurance claim denied. Additionally, Rhode Island lawmakers have indicated their intent to introduce legislation that would allow businesses to recover COVID-19 losses if they had business interruption insurance in force on the date that Rhode Island Governor Gina Raimondo declared a state of emergency. Since Rhode Island’s legislative session is currently suspended, lawmakers cannot currently introduce such a bill.
The number of state legislatures taking action to help businesses recover under their insurance policies continues to grow. On March 16, New Jersey was the first state to propose legislation addressing business interruption coverage. Since then, four more states – Massachusetts, Ohio, and most recently, New York and Louisiana – have followed suit. The proposed bills in these jurisdictions generally provide that, notwithstanding any other law or policy language to the contrary, every insurance policy that insures against loss or damage to property which includes the loss of use and occupancy and business interruption shall be construed to include coverage for business interruption resulting from COVID-19. The New Jersey, Massachusetts, Ohio, and New York bills provide mechanisms for insurers to seek reimbursement from a state established and managed fund for losses paid related to COVID-19. It is expected that additional states will join this growing list of jurisdictions seeking to mitigate the economic losses sustained by businesses due to COVID-19 through insurance.