In an effort to help struggling businesses deal with the fall-out from the COVID-19 pandemic, legislatures in Florida, Illinois, Maine and Rhode Island have recently proposed legislation to require insurance carriers to cover COVID-19 related business interruption claims. Traditionally, business interruption policies require that a business suffer some sort of physical loss or damage before the carrier will pay-out on a business interruption claim. Likewise, business interruption coverages typically maintain policy exclusions for losses caused by a virus. However, the legislation introduced in these states would nullify these traditional policy aspects and require carriers to cover business interruption claims that have historically been beyond the scope of such policies. A summary of each state’s legislation is provided below.
Florida – House Bill HB1617
On March 02, 2021, Florida introduced House Bill HB1617, which would create a new section of Florida’s Insurance Code to expand the definition of business interruption coverage. Specifically, the bill provides that where a business complies with “a governmental order to close or to reduce its service capacity due to a state of emergency or public health emergency,” such compliance constitutes a business interruption for purposes of a business interruption policy. This expanded definition of business interruption would apply to all business interruption coverages in effect on or after the bill’s adoption. Although the bill makes no distinction between authorized and unauthorized (surplus lines) insurers, the bill’s language appears broad enough to cover business interruption coverages offered by unauthorized insurers.
Illinois – House Bill HB3166
On February 18, 2021, Illinois introduced House Bill HB3166, which would add a provision to the Illinois Insurance Code defining all business interruption coverage issued in the state to include coverage for loss of use and occupancy of a business resulting from a public health emergency or disaster, regardless of physical damage. The bill would not be retroactive, and would apply only to those policies issued or renewed as of the date the bill is passed into law. The bill’s application appears to embrace all business interruption coverages, regardless of whether the coverage is offered by an authorized or unauthorized (surplus lines) insurer.
Maine – Legislative Document No. 694
On March 04, 2021, the Maine House of Representatives introduced Legislative Document No. 694, which, if passed, would prohibit insurers offering business interruption coverage in Maine from:
- including a policy provision that prohibits coverage in the event of a World Health Organization or a United States Government declaration of a pandemic;
- denying coverage for loss of occupancy or interruption to operations of the business resulting from the COVID-19 pandemic;
- denying coverage on the basis that the COVID-19 virus is subject to the policy exclusion for losses resulting from a virus; and
- denying coverage under the theory that the insured has not suffered any physical damage or loss to property due to the pandemic.
The bill retroactively applies to all business interruption policies in-force as of March 15, 2020, the date the COVID-19 state of emergency was first declared in Maine. The bill applies only to insurers authorized to do business in Maine.
Rhode Island – Senate Bill S0347
On February 25, 2021, Rhode Island introduced Senate Bill S0347, which, if passed, would require that all policies insuring a business for loss or damage to property include “among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic.” The bill only applies to policies issued to businesses with less than one hundred employees working at least twenty-five hours per week that were in force on March 9, 2020, the date Rhode Island issued its COVID-19 state of emergency. The bill is broadly worded to suggest applicability to business interruption coverages issued by both authorized and unauthorized (surplus lines) insurers.
In addition, the bill provides that all insurers that indemnify insureds for pandemic related claims may apply to the Rhode Island Department of Business Regulation for financial relief and reimbursement. The bill further authorizes the Rhode Island Insurance Commissioner to “impose upon, distribute among, and collect from” insurers, other than life and health insurers, any amounts necessary to cover insurers’ claims for financial relief and reimbursement.
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:
Maine – Legislative Document No. 694
Rhode Island – Senate Bill S0347
We also note that earlier this year New York, Oregon, Pennsylvania, Rhode Island and Washington introduced legislation similar to the legislation discussed above. A summary of these legislative updates can be found at: https://www.insurereinsure.com/2021/02/08/state-legislatures-seek-to-protect-insureds-from-covid-19-business-interruption/.
