May 14, 2020 - Insurance Recovery Group News: Proposed Legislation Related to Business Interruption Insurance and COVID-19
Massachusetts and New York are among a growing number of states that have proposed legislation to ensure business interruption insurance coverage for losses related directly or indirectly to the coronavirus pandemic.
The proposed legislation attempts to ensure that policyholders who purchased business interruption insurance can access such coverage for losses related to the COVID-19 pandemic, notwithstanding exclusions for viruses or other challenges to coverage asserted by insurance carriers. In addition, the legislation proposes funding for this coverage through industry assessments in order to spread the risk. The insurance industry has pushed back hard against the legislation arguing that such laws would overwrite private contracts. Proponents of these bills reason that the laws would provide for the creation of funds to reimburse insurers for losses paid by the industry and are another form of government stimulus funding which utilizes the insurance industry to administer the distribution of those funds.
Although it is unknown whether the proposed legislation will be enacted, it is important to recognize that not all policies need this legislative assistance. Some business interruption policies likely provide business interruption and other types of coverage for COVID-19 related losses under their terms, as written, and the enactment of legislation would not change such coverage.
Here is a summary of the proposals for Massachusetts and New York. As of the time of this writing, neither proposal has been enacted into law.
Insurance companies can apply to the commissioner of insurance for relief and reimbursement of amounts paid on claims through a fund that is created by the Act, subject to eligibility and reimbursement procedures to be established by the commissioner. The fund will be funded by assessments to all licensed domestic and foreign insurers which sell business interruption insurance in the commonwealth at rates to be established by the insurance commissioner. This annual assessment will be in addition to the assessments authorized by Chapter 26, Section 8C of Massachusetts’ General Laws.
As of this writing, the current status of legislation is that it has been referred to the Joint Committee on Financial Services.
An insurer that indemnifies an insured for a claim under this Act, may apply to the superintendent of financial services for relief and reimbursement by the department from funds collected for this purpose. The superintendent of financial services is authorized to impose a special apportionment to establish a fund based upon proportionate shares of the market for each company based upon premium or premium taxes received on business interruption insurance within the state during the last calendar year.
As of this writing, the current status of legislation is that it is in assembly committee.
The Insurance Recovery Group at Murtha Cullina LLP is closely monitoring these pandemic-related legislative developments and litigation concerning coverage during this rapidly evolving situation. We will provide updates as appropriate. If you have questions about whether your current insurance policies provide coverage for losses arising out of the Coronavirus, do not hesitate to contact us.
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