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We hope that you and your families are safe and well, and that it is as enjoyable a holiday as possible for those of you observing Easter and Passover.
As reported in our last post, discussions were underway among Pennsylvania state legislators over proposed legislation that would essentially force insurers to provide coverage for COVID-19-related business interruption losses. Those discussions came to fruition on April 3, 2020, when a bipartisan group of legislators introduced House Bill No. 2372, entitled the “Business Interruption Insurance Act”. If enacted, this bill would require insurers with business interruption coverages in their policies to pay small business insureds for “loss or damage to property, which includes the loss of use of occupancy and business interruption … due to global virus transmission or pandemic.”
The proposed legislation would require the indemnification of insureds subject to the “broadest or greatest limit and lowest deductible” available under the business interruption coverage part, and would only be applicable to: (a) policies in force on March 6, 2020, which represents the “date of the Proclamation of Disaster Emergency concerning the coronavirus pandemic…”; and (b) insureds with less than 100 full-time employees in the state. Insurers may be able to obtain relief for the payment of such losses by applying for reimbursement with the Pennsylvania Insurance Commissioner, who would be authorized to collect the funds necessary for reimbursement from all property/casualty insurers doing business in the state, irrespective of whether they provide business interruption coverage.
Pennsylvania now joins New Jersey and four other states (New York, Massachusetts, Ohio and Louisiana) in introducing legislation that would appear to provide coverage for COVID-19 business interruption losses notwithstanding the existence of “virus or bacteria” exclusions contained in many of these policies. However, the insurance lobby in Pennsylvania is formidable, and they will likely argue that this bill, which would effectively re-write policies, violates constitutional safeguards against the impairment of private contracts and may subject insurers to potential insolvency. The Pennsylvania bill has now been referred to the House of Representatives Insurance Committee. No further action has been taken yet on the proposed New Jersey legislation.
Finally, in a related development, on Monday, April 6, 2020, the Pennsylvania legislature introduced Bill No. 2386, entitled the “COVID-19 Disaster Business Interruption Grant Act”. Such legislation, if passed, would serve to issue emergency grants to businesses that have had a business interruption claim denied by insurers. That bill has been referred to the House of Representatives Commerce Committee for further consideration.
We will continue to monitor these and related issues, and please visit our website, www.rlblawgroup.com, for further updates.