On Tuesday, Ohio state Reps. Jeffrey Crossman and John M. Rogers, both Democrats, introduced H.B. 589, while Massachusetts state Sen. James B. Eldridge, also a Democrat, introduced S.D. 2888. Generally speaking, both measures would effectively rewrite certain business interruption policies to include the coronavirus pandemic as a covered cause of loss.
Much of the two bills’ language tracks closely with that included in a measure proposed earlier this month by a trio of New Jersey General Assembly members in response to the spread of COVID-19.
The Garden State bill, A3844, was approved by the General Assembly’s Homeland Security and State Preparedness Committee on March 16 and was set for a vote by the full chamber the same day, but the sponsors pulled it at the last second so they could engage in further discussions with concerned insurance industry representatives. As of Wednesday, no further action had been taken on the bill.
The Ohio measure would apply to business interruption policies held by Buckeye State-based companies with 100 or fewer full-time employees, provided the policies were issued by March 9, when Gov. Mike DeWine declared a state of emergency. The Massachusetts bill, meanwhile, would apply to policies sold to businesses in the commonwealth with 150 or fewer full-time employees, as long as the policies were in place by the time Gov. Charlie Baker issued his March 10 emergency declaration.
The New Jersey and Ohio bills would implicitly override common terms contained in business interruption policies, such as exclusions for losses due to viruses and the requirement that an interruption in a policyholder’s operations be attributable to “direct physical loss” or damage to its property. The Massachusetts measure is even more explicit, stating that insurers cannot deny business interruption claims based on “COVID-19 being a virus, even if the relevant insurance policy excludes losses resulting from viruses” or “there being no physical damage to the property of the insured or to any other relevant property.”
Each of the three state legislative proposals provides that insurers paying out business interruption claims under affected policies would potentially be eligible for reimbursement from that state’s insurance regulator, pursuant to as-yet-undetermined standards that the regulator would have to develop. Under each bill, these reimbursements would be paid out of a fund financed by special assessments imposed on insurers that sell business interruption coverage.
The Ohio and Massachusetts bills are likely to be met with backlash from insurance industry trade groups, which quickly sounded the alarm on the New Jersey measure. After the Garden State bill was put on hold on March 16, for instance, a representative of the National Association of Mutual Insurance Cos., or NAMIC, circulated a letter calling the proposal “potentially disastrous” and expressing concern that it constitutes an “inappropriate intrusion into contract law.”
Representatives of the sponsors of the Ohio and Massachusetts bills did not immediately respond to requests for comment on Wednesday, nor did representatives for NAMIC or another prominent insurance industry group, the American Property Casualty Insurance Association.