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N.Y. introduces bill on pandemic-related business interruption claims

Claire Wilkinson www.businessinsurance.com

March 30, 2020


New York lawmakers have joined Ohio, Massachusetts and New Jersey in introducing a bill that would force insurers to retroactively cover business interruption claims due to COVID-19.


New York Assembly members Robert Carroll and Patricia Fahy on Friday introduced A. 10226 which would require insurers providing business interruption and loss of use coverage to cover “business interruption during a period of a declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.”


The New York bill would apply to policies in force by March 7 and issued to businesses with fewer than 100 full-time employees.


“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 of emergency due to the coronavirus disease 2019 (COVID-19) pandemic,” the text of A. 10226 states.


The bill would require insurers to indemnify the policyholder “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 COVID-19 pandemic, the text of the bill adds.


Insurers that pay out business interruption claims under the proposed act can seek reimbursement from the New York Superintendent of Insurance, the text states.

This would be funded by a “special purpose apportionment” the New York Superintendent of Insurance would be authorized to collect from all insurers doing business in the state, under the proposed legislation.


Insurance industry groups have pushed back, claiming that the move to force insurers to provide retroactive business interruption coverage for pandemics could impact the financial stability of the sector.


Viruses, pandemics and contagious/infectious diseases such as COVID-19 are generally excluded from standard form commercial property policies. Policies also require direct physical loss to property for coverage to kick in, they say.


Retroactively requiring contractual changes for which no premium was collected is “a dangerous, unprecedented, and unconstitutional proposal that NAMIC emphatically opposes,” Erin Collins, vice president, state affairs at the Indianapolis-based National Association of Mutual Insurers, said in an email.


“Broad business communities will be ultimately harmed by these kinds of proposals in that they may prevent potential financial assistance from anticipated relief programs, and will have a deep chilling effect on the availability of insurance for the business community moving forward,” Ms. Collins said.


If policymakers force insurers to pay for losses that are excluded under existing insurance policies, the stability of the sector could be affected, a spokeswoman for the New York-based Insurance Information Institute said in written response.


“Insurers pay millions of dollars annually to business owners who are impacted by tornadoes, hurricanes and other disaster losses. We’re now coming into tornado and hurricane season. How are we going to pay for the losses from these disasters that are covered if we don’t have the financial ability?” she said in an email.


The New York bill has been referred to the Assembly Committee on Insurance. It follows the introduction of H.B. 589 in Ohio, S.D. 2888 in Massachusetts and A. 3844 in New Jersey.

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