On March 27, 2020, New York State Assembly introduced Bill A-10226, requiring certain perils be covered under business interruption insurance during the coronavirus disease 2019 (COVID-19) pandemic.
If enacted in its current draft form, the proposed bill would force insurers of certain businesses to provide business interruption coverage and pay for COVID-19 losses, even though policies may contain provisions that expressly exclude coverage for virus or bacteria related losses. Insurers could then apply to the superintendent of financial services for relief and reimbursement by the department.
The proposed bill would remove virus-related exclusions and create coverage for first-party losses from COVID-19, even under policies where coverage is already excluded. The law applies to policies in force on March 7, 2020 and issued to policyholders with less than 100 eligible employees in New York. The proposed law defines “eligible employee” as “a full-time employee who works a normal work week of 25 or more hours.”
In its current form, the draft bill would provide as follows:
Section 1. (a) Notwithstanding any provisions of law, rule or regulation to the contrary, every policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption, shall be construed to include among the covered perils under that policy, coverage for business interruption during a period of a declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.
(b) The coverage required by this section shall indemnify the insured, subject to the limits under the policy, for any loss of business or business interruption for the duration of a period of a declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.
If enacted, this Act will take effect immediately, and shall be deemed to have been in full force and effect on and after March 7, 2020 and will apply to insurance policies in force on that date.
On March 16, 2020, the New Jersey Assembly proposed a similar bill that would mandate insurers of certain businesses to provide retroactive business interruption coverage and pay for COVID-19 losses. New Jersey’s proposed bill was pulled off the table on March 17 without a full Assembly vote but will likely re-emerge in due course.
On March 24, 2020, Ohio introduced a bill that would force insurers to retroactively cover business interruption losses arising from COVID-19. Other states, including Massachusetts and Pennsylvania have followed this lead.
These proposed laws, which critics argue unconstitutionally restrict freedom of contract by re-writing insurance policies, underscore how the unprecedented threat of COVID-19 will pose unique challenges for commercial insurers and policyholders alike as the pandemic situation develops.
We are following proposed legislation and other emerging COVID-19 issues. Fullerton Beck is prepared to help clients interpret their policies and act as a confidential resource for questions and concerns.
We will continue to monitor and write about the rapidly evolving coronavirus situation and how it may impact our clients. For more information on the New York legislation or any coronavirus-related insurance coverage topics, contact Verne Pedro at vpedro@fullertonbeck.com or 732-515-6293.