State Legislatures Seek to Protect Insureds from COVID-19 Business Interruption

Legislatures in New York, Oregon, Pennsylvania, Rhode Island and Washington have all proposed legislation seeking to curb COVID-19’s impact on businesses in their state. Each state’s proposed legislation essentially prohibits insurers from denying business interruption claims arising from COVID-19 related losses. Although there is some variation between the proposed legislation in each state, the goals are quite clear—allow insureds to recover for losses tied to the pandemic, without regard to policy exclusions or gaps in coverage that may otherwise prohibit recovery. A summary of each state’s legislation is provided below.

New York – Assembly Bill A1937

New York Assembly Bill A1937, introduced on January 13, 2021, nullifies policy provisions denying claims for loss or damage to property based on “virus, bacterium or other microorganism.” The bill covers businesses with fewer than 250 employees working at least 25 hours a week and provides that insurers, including excess lines insurers, which indemnify insureds who file claims based on losses due to virus, bacterium or other microorganism, may apply to the Department of Financial Services for financial relief and reimbursement. The bill further authorizes the Department of Financial Services to collect from insurers, including excess lines insurers, amounts necessary to cover such requests for financial relief and reimbursement.

Oregon – House Bill HB2730

Oregon House Bill HB2730, introduced on January 19, 2021, applies certain rules of policy “construction” to any “action between an insurer and an insured to determine the existence of ‎coverage for a business interruption claim.” The bill requires that all business interruption ‎coverages offered in Oregon be interpreted to exclude coverage for “pandemic” related claims only if expressly provided ‎for in the policy—unless application of this requirement “results in an interpretation of [the] ‎policy that is contrary to the established or expressed mutual intent of the parties.” The bill further ‎establishes rules for insurers’ proper handling of business interruption claims, including that insurers ‎respond diligently to claims, investigate claims within 15 days of receipt, make timely payments on ‎claims, not make improper claims denials, and not request unnecessary information from insureds that unduly slows the processing of claims.

Pennsylvania – Senate Bill No. 42

Pennsylvania Senate Bill No. 42, introduced on January 20, 2021, would require any ‎property policy issued in Pennsylvania, with an effective date on or before March 6, 2020, insuring against losses ‎related to property damage or loss of use of a property, to be ‎construed to cover “loss or property damage due to COVID-19.” Under this bill, insureds classified as ‎small businesses in Pennsylvania would receive 100% of the policy limit on covered losses, while insureds ‎not classified as small businesses in Pennsylvania would receive 75% of the policy limit on ‎covered losses.

Rhode Island – House Bill H5052

Rhode Island House Bill H5052, introduced on January 22, 2021, would require all business interruption policies insuring against “loss or damage to property” to cover “any business lost due to the COVID-19 global pandemic.” This requirement applies even to policies that expressly exclude coverage for (1) losses from a virus, and (2) losses where there is no physical damage to the property. The bill further authorizes insurers paying such claims to apply to the Rhode Island Department of Business Regulation for financial relief and reimbursement, and authorizes the Department to collect assessments from licensed insurers selling business interruption coverage as a means to cover insurer claims for relief and reimbursement. The bill’s application is expressly limited to businesses with 150 or fewer full-time employees with business interruption policies in force on or after March 9, 2020.

Washington – Senate Bill SB5351

Washington Senate Bill SB5351, introduced on January 26, 2021, would require any Washington ‎property policy providing coverage for “direct physical loss of or damage to property” to ‎be construed to include a right of recovery for “the deprivation of such property and the loss of the ability to use such property.” The bill—citing COVID-19’s “devastating impact on small business”—would also extend the statutorily prescribed period for challenging business interruption claims denials from one to two years.

We will continue to monitor these and other state legislative updates in connection with COVID-19 related business interruption claims and provide updates according. The text of each bill can be found at the links below:

• New York – Assembly Bill A1937
• Oregon – House Bill HB2730
• Pennsylvania – Senate Bill No. 42
• Rhode Island – House Bill H5052
• Washington – Senate Bill SB5351

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