03/20/2020
Does Business Interruption Insurance cover losses due to the Pandemic?
Application of Business Interruption Insurance and Similar Coverages:
On the discussion about the nature of business interruption insurance and lack of coverage under such policies for losses related to COVID-19. Standard commercial policies clearly do not provide coverage for such a pandemic, but some policymakers are nevertheless questioning this fact and/or contemplating ways to require insurers to compensate businesses for events that were excluded. Other officials have been more helpful and have issued statements indicating that coverage does not exist in these scenarios. Below is a summary of recent actions:
The most notable state action that has occurred is in New Jersey, where a bill (AB 3844) was introduced that would effectively revise existing policies and require that “every policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption … be construed to include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic.” The proposal would apply to businesses with less than 100 full-time employees (i.e. those that work 25 or more hours in a normal week) and require insurers to indemnify policyholders up to the limits that exist under the policy. It would also establish a mechanism to apportion the costs of such payments among insurers writing business in the state. Some reports have suggested this bill was enacted by the legislature or is certain to become law, but the reality is that this proposal is now on hold and that the situation is very fluid. Questions have been raised about the merits, constitutionality, and others aspects of the measure, and its fate is uncertain at this point.
