On March 19, we wrote this article on New Jersey’s proposed bill in regards to forcing carriers to pay business interruption claims due to losses stemming from COVID-19 related shutdowns. Business Income, COVID-19, and New Jersey State Intervention
In less than a week, two additional states have filed similar bills. We expect other states to file similar bills; we will present a summary of those bills as they develop. So far the bills are similar in nature; they apply to smaller insureds with limited numbers of employees with coverage that already includes business interruption coverage. Insurers paying these claims will apply to the insurance department for reimbursement, and those funds will be obtained by the departments by charging carriers with assessments to raise such funds. These bills can have an enormous impact on the industry and interpretation of insurance policies.
Bill A-3844 Similar to later bills, requires carriers to consider interruption due to global virus transmission or pandemic as a covered cause of loss. This is specific to the Public Health Emergency and State of Emergency declared by the Governor in the March 9, 2020 executive order.
H.B. 589 – The bill is to require insurers offering business interruption coverage to cover losses attributable to viruses and pandemics and to declare an emergency.
Three terms are defined; eligible employees, net written premiums received, and state of emergency. Eligible employees are those full-time employees with a normal work week of twenty-five or more hours. Net written premiums received are gross direct written premiums less return premiums and dividends credited or paid to policyholders as shown on the carrier’s financial statement. State of emergency means the state of emergency declared March 9, 2020 to protect Ohio citizens from COVID-19.
The bill states that every policy providing business interruption coverage in force as of the effective date of the bill shall be construed to include among covered perils global virus transmission or pandemic during the state of emergency. Coverage shall apply during the state of emergency. The business must be located in Ohio and have one hundred or fewer employees, and be covered by a policy that included business interruption on the effective date of the bill. Insurers paying such claims may apply to the Superintendent of Insurance for relief and reimbursement from funds collected for this purpose.
The Superintendent will develop claim procedures for insurers to follow to submit claims and will include standards for carriers to use to avoid fraudulent claims by insureds. Claims to insurers will either be paid as they are received or after an assessment has been charged to collect funds for these claims.
An assessment will be charged to carriers in order to recover the costs of these claims. Assessments will be in proportion to net written premiums subject to the assessment on risks in the state during the calendar year immediately preceding the effective date of the bill. A business Interruption Insurance Fund will be created in the state treasury. Any funds remaining after all claims have been paid will be returned to insurers in a manner prescribed by the Superintendent. When the fund balance reaches 0, the fund will be dissolved.
May 28 – The House of Representatives passed H.B. 606, a bill that temporarily provides health care and emergency services providers qualified civil immunity, and expands workers compensation coverage for certain employees who contract COVID-19. The bill provides temporary liability protection for health care workers and emergency services providers from lawsuits during a government-declared disaster over the acquisition of COVID-19 by those they treat. A rebuttable presumption is also added for workers compensation for certain workers who contract COVID-19, including retail food workers, food processing workers, firefighters, police officers, emergency medical personnel and corrections officers. The bill moves to the Senate for review.
A bill SD 2888 was proposed to the legislature stating that every insurance policy providing property damage that provides business interruption coverage, regardless of terms and exclusions in the policy, will be construed to provide coverage for interruption directly or indirectly resulting from COVID-19. Carriers may not deny a claim for loss of use or occupancy and business interruption on account of COVID-19 being a virus, even if the policy excludes viruses, and even if there is no physical damage to the property. The coverage will apply subject to policy limits until the emergency declaration is lifted. This applies only to insureds with 150 or fewer full-time equivalent employees, and whose policies are in force on the effective date of this act, or become effective before the date executive order 591 is rescinded by the Governor.
Insurers that provide such coverage may apply to the Commissioner for relief and reimbursement from funds collected for such purpose. The Commissioner will establish procedures for the submission of such claims. The Commissioner is authorized to make one or more assessments against insurers selling business interruption coverage as necessary to recover the amounts paid to insurers for these claims.
Bill A 10226 was proposed March 27. It states that regardless of any contrary laws, rules or regulations, that every policy of insurance that provides coverage for loss or damage to property that includes business interruption coverage, shall be construed to include as covered perils losses due to the period of declared state of emergency due to the COVID-19 pandemic.
Coverage will be for any loss of business or business interruption for the duration of the declared state of emergency for COVID-19. This applies to businesses with less than 100 eligible employees in force on the effective date of this act. Eligible employees are those that work full-time for a normal week of twenty-five or more hours.
Insurers providing such coverage can file a claim with the superintendent for relief and reimbursement by the department from funds collected for this purpose. The superintendent will establish procedures for the filing and qualification of claims. The procedures will contain safeguards to protect against fraudulent claims.
The superintendent has the ability to collect additional funds from carriers to recover the amounts paid by insurers for this coverage. Such fund will be distributed based upon proportion of the net written premiums subject to the authorized apportionment for the calendar year preceding, bears to the sum total of all net written premiums received by all companies during that calendar year.
S.B. 477 states that regardless of other contrary provisions, as of March 11, 2020 all insurance policies that provide coverage for business interruption, loss of use, loss of occupancy will be construed to provide coverage from imminent threat posed by COVID-19. Coverage exists for the duration of the declared state of emergency.
Policies providing business interruption coverage after August 1, 2020 will include a notice of all exclusions on a form prescribed by the commissioner. The insured or his representative must sign the form. This is the only bill so far that does not limit coverage to businesses with a certain number of employees.
H.B. 858 is similar in that it requires all insurance policies providing loss of use and occupancy and business interruption coverage in force as of the date of the Act to construe to include as covered perils global virus transmission or pandemic as provided in emergency proclamations related to the coronavirus disease 2019 pandemic. Again, coverage applies for the duration of the public health emergency. This applies to insureds with less than 100 full-time employees in force as of the effective date of the Act. It applies retroactively to March 11, 2020.
MAY 13 - Lawmakers scrapped this bill, agreeing to rewrite and amend it to allow a proposal requiring carriers to clarify exclusions on business interruption policies going forward. Clarifying the exclusions makes sense; we will have to see what the draft actually says and if it becomes part of the regulations.
H.B. 2372 states that regardless of any other law, rule or regulation insurance policies providing coverage against loss of property damage, that includes loss of use and business interruption that were in force as of the date of the emergency order shall be construed to include coverage for global virus transmission or pandemic as covered perils. This applies to insureds with fewer than 100 employees in the commonwealth of Pennsylvania.
Insurers that make payments on such claims may apply to the commissioner for relief and reimbursement by the commissioner from money collected and made available for this purpose. The commissioner shall establish standards to protect against fraudulent submissions from insureds and establish appropriate safeguards for insurers to use in reviewing claims.
The commissioner may impose upon all insurers engaged in property and casualty insurance to pay additional amounts necessary to recover the amounts paid by carriers for the business interruption claims.
A draft bill titled ”Covid-19 Pandemic Insurance Recovery Act” has been created by representative John Lombardi to provide coverage for businesses suffering loss due to the state of emergency that was declared March 9, 2020. Similar to other states’ bills it would apply to businesses with fewer than 100 employees, and leaves the door open for insurers to apply to the department for reimbursement for claims paid from funds collected and made available for that purpose. It would provide coverage for losses related to the coronavirus even though policies exclude such coverage.
April 8 – S.B. 1188 states that any insurance policy providing coverage for damage to property, regardless of any endorsements or exclusions, that includes loss of use and business interruption coverage will be construed to include as covered perils coverage for interruption directly or indirectly resulting from the pandemic known as COVID-19, including all mutated forms of the COVID-19 virus. Insurers cannot deny a claim for loss of use or business interruption with respect to COVID-19 on account of COVID-19 being a virus, even if the policy excludes viruses, there being no physical damage to the property of the insured or other relevant property, or orders by any civil authority or acts or decisions for a governmental entity. Coverage is subject to policy limits.
Insurers paying these claims may apply to the department for relief and reimbursement. The department will establish procedures for submission and qualification of claims by insurers. Procedures will be developed to protect against fraudulent claims. The department is authorized to make one or more assessments per year in order to recover amounts paid by insurers for these claims. This applies to insureds with 150 or fewer full-time equivalent employees.