On March 19, our sister publication National Underwriter FC&S Expert Coverage Interpretation covered proposed New Jersey legislation that would force insurance carriers to pay business interruption claims due to losses stemming from Covid-19–related shutdowns. Less than a week later, two additional states had filed similar bills—and FC&S Expert Coverage Interpretation expects other states to follow suit.
So far, the bills are similar in nature: They apply to smaller insureds, with a limited number of employees, whose coverage already includes business interruption. Insurers paying these claims will apply for reimbursement to the insurance department, which will raise the funds by charging carriers with assessments.
These bills may have an enormous impact on the industry and interpretation of insurance policies.
Ohio H.B. 589
This bill requires insurers that offer business interruption coverage to cover losses attributable to viruses and pandemics and to declare an emergency.
It defines three terms: eligible employees, net written premiums received, and state of emergency. “Eligible employees” are those full-time employees with a normal workweek of 25 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 statements. “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 that was in force as of the effective date of the bill will be construed to include among covered perils global virus transmission or pandemic during the state of emergency. The business must be located in Ohio, have 100 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 be paid either as they are received or after an assessment has been charged to collect funds for the claims.
An assessment will be charged to carriers in order to recover the costs of the 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.
Massachusetts S.D. 2888
This bill states that insurance policies providing property damage that includes business interruption coverage will be construed to provide coverage for interruption directly or indirectly resulting from Covid-19, regardless of terms and exclusions in the policy. 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.
This applies only to insureds with 150 or fewer full-time equivalent (FTE) employees and with policies in force on the effective date of this act, or becoming effective before the date executive order 591 is rescinded by the governor. The coverage will apply, subject to policy limits, until the emergency declaration is lifted.
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.
New York Bill A10226
This bill was proposed last Friday. It states that—regardless of any contrary laws, rules, or regulations—every insurance policy providing 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 includes any loss of business or business interruption for the duration of the declared state of emergency. This applies to businesses with fewer than 100 eligible employees; eligible employees are those that work full-time for a normal week of 25 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 funds 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.