{"id":315,"date":"2020-03-24T11:21:37","date_gmt":"2020-03-24T15:21:37","guid":{"rendered":"http:\/\/blogs.duanemorris.com\/insurancelaw\/?p=315"},"modified":"2020-03-24T11:21:37","modified_gmt":"2020-03-24T15:21:37","slug":"statutes-compelling-coronavirus-business-interruption-insurance-should-face-constitutional-constraints","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/insurancelaw\/2020\/03\/24\/statutes-compelling-coronavirus-business-interruption-insurance-should-face-constitutional-constraints\/","title":{"rendered":"Statutes Compelling Coronavirus Business Interruption Insurance Should Face Constitutional Constraints"},"content":{"rendered":"

We previously wrote about the growing likelihood that insurance companies would face claims for business interruption and contingent business interruption insurance claims as their insureds looked to cope with the broad effects of the novel coronavirus outbreak and response.\u00a0Heating Up: New Orleans-Based Oceana Grill Seeks Insurance Coverage for Coronavirus-Caused Business Interruption<\/a>.\u00a0 Now, state and federal governments are beginning to consider ways that they might compel such coverage.<\/p>\n

Last week, members of the federal government wrote to insurance industry leaders urging them to expand commercial business interruption coverage for COVID-19 losses.\u00a0 In response, the insurance industry leaders replied, \u201cStandard commercial insurance policies offer coverage and protection against a wide range of risks and threats and are vetted and approved by state regulators. Business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19.\u201d<\/p>\n

The New Jersey legislature took the first steps toward enacting a law to expand coverage.\u00a0 New Jersey Bill A-3844 provides: \u201cNotwithstanding the provisions of any other 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 in force in this State on the effective date of this act, shall be construed to include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic\u2026\u201d\u00a0 New Jersey\u2019s bill passed out of committee, but was pulled before it was more broadly considered.<\/p>\n

A law that seeks to \u201ccompel\u201d insurance coverage, like New Jersey Bill A-3844, might violate the Contracts Clause of the U.S. Constitution.\u00a0 The Contracts Clause provides, in relevant part, \u201cNo State shall \u2026 [pass any] Law impairing the Obligation of Contracts[.]\u201d\u00a0 \u201cLaw\u201d in this context includes constitutional provisions, statutes, administrative regulations and municipal ordinances, but not court rulings.\u00a0 See Tidal Oil Co. v. Flanagan<\/em>, 263 U.S. 444, 451 (1924).<\/p>\n

Not all laws affecting contracts violate the Contracts Clause.\u00a0 A court considering the issue will apply a two-step test.\u00a0 The court begins by considering whether the state law has \u201coperated as a substantial impairment of a contractual relationship.\u201d\u00a0 Sveen v. Melin<\/em>, 138 S. Ct. 1815, 1821 (2018) (quotations, citations omitted).\u00a0 If yes, then the court will consider whether the \u201cstate law is drawn in an appropriate and reasonable way to advance a significant and legitimate public purpose.\u201d\u00a0 Id.<\/em> (quotations, citations omitted).<\/p>\n

As reiterated in Sveen, supra,<\/em> \u201cGovernment has always had a special relation to insurance.\u00a0 The ways of safeguarding against the untoward manifestations of nature and other vicissitudes of life have long been withdrawn from the benefits and caprices of free competition.\u201d This \u201cspecial relation\u201d is evident in efforts throughout the country asking insurers to suspend cancelations and nonrenewals, or at least extend grace periods.\u00a0 Whether more targeted efforts, like New Jersey Bill A-3844, will continue to arise should be closely monitored.<\/p>\n","protected":false},"excerpt":{"rendered":"

We previously wrote about the growing likelihood that insurance companies would face claims for business interruption and contingent business interruption insurance claims as their insureds looked to cope with the broad effects of the novel coronavirus outbreak and response.\u00a0Heating Up: New Orleans-Based Oceana Grill Seeks Insurance Coverage for Coronavirus-Caused Business Interruption.\u00a0 Now, state and federal … <\/p>\n

Continue reading “Statutes Compelling Coronavirus Business Interruption Insurance Should Face Constitutional Constraints”<\/span><\/a><\/p>\n","protected":false},"author":243,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[385,382,42,381,308,282],"ppma_author":[431],"class_list":["post-315","post","type-post","status-publish","format-standard","hentry","category-general","tag-all-risk-coverage-policy","tag-coronavirus","tag-coverage","tag-covid-19","tag-daniel-heidtke","tag-insurance-law"],"authors":[{"term_id":431,"user_id":243,"is_guest":0,"slug":"dbheidtke","display_name":"Daniel B. Heidtke","avatar_url":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-content\/uploads\/sites\/12\/2024\/10\/Danny-Heidtke-LinkedIn-6249-e1729870422263-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/315","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/users\/243"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/comments?post=315"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/315\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/media?parent=315"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/categories?post=315"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/tags?post=315"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/ppma_author?post=315"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}