An Update on Congressional Efforts to Compel Coronavirus Business Interruption Insurance

By Dominica C. AndersonPhilip R. Matthews and Daniel B. Heidtke

We previously wrote about the growing number of lawsuits by insureds seeking business interruption insurance coverage for business losses in response to the novel coronavirus (here and here), and the constraints that state and federal governments should face were they to compel such coverage. We also previously detailed nationwide efforts aimed at enacting legislation compelling business interruption and contingent business interruption insurance for COVID-19 losses.

As of the date of this update, eight states have proposed a number of bills relating to business interruption insurance. Those states include Louisiana (SB477; HB858), Massachusetts (SD2655; SD2888), Michigan (HB5739), New Jersey (AB3844), New York (AB10226; SB8211), Ohio (HB589), Pennsylvania (HB2372), and South Carolina (SB1188). The proposed bills in each of the aforementioned states have been referred to various legislative committees, with Louisiana’s Senate Insurance Committee set to consider SB477 on May 13, 2020.

Not to be outdone, U.S. Congress also waded into the mix. We previously wrote about HR 6494, labeled the “Business Interruption Insurance Coverage Act of 2020”. The “Never Again Small Business Protection Act of 2020,” HR 6497, was also recently introduced.

HR 6497, as drafted, requires any insurer that “offers or makes available business interruption insurance coverage” to “make available” “optional additional coverage” that covers losses resulting from “business interruption due to any order, by any officer or agency of the Federal Government or of any State or local government, requiring cessation of operations during a national emergency.” HR 6497 directs the Treasury Department to undertake a study “regarding the effectiveness and efficiency of using a Federal backstop mechanism, private equity pools, risk assessments, and market pricing to reinsure insurers for excessive losses” that could be caused by the mandate that insurers provide the “optional additional coverage” described in Section 2 of HR 6497. Unlike other proposed bills, HR 6497 precludes a business from obtaining the “optional additional coverage” if that business involuntarily terminated an employee or terminated the health care insurance coverage of any employee during the period that the national emergency was in effect. Both HR 6494 and HR 6497 have been referred to the House Insurance Committee.

In addition to HR 6494 and HR 6497, several weeks ago, Carolyn Maloney (D-N.Y.) circulated a draft bill labeled the “Pandemic Risk Insurance Act of 2020,” but the draft has not been formally introduced.

While it appears that legislative efforts have begun to slow from the hurried pace seen in March and April, we continue to monitor and evaluate these developments.