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April 28, 2020

COVID-19: Insurance Coverage and Regulation Updates

Recent developments in Congress and state legislatures as well as regulations issued by state governors and regulatory agencies could significantly impact the insurance industry as governments attempt to address the business and personal losses caused by COVID-19.

At the federal level, HR 6494 was introduced in the US House of Representatives on April 14. This bill would require every insurer offering business interruption coverage to provide coverage for losses resulting from any viral pandemic and any closure of businesses or evacuation required by law or order of any local, state, or federal government. Notably, this bill would allow an insurer to charge an increased premium for this coverage. However, any exclusion for these losses in a current policy would be deemed unenforceable unless the policyholder fails to pay the premium increase. The bill appears to have bi-partisan sponsors and has been referred to the House Financial Services Committee.

In New York State, the Assembly introduced Bill No. A10226 on March 27, which would retroactively require business interruption policies to cover COVID-19 losses. That bill requires any business-interruption coverage that was issued to a business with less than 100 employees to cover “any loss of business or business interruption for the duration of a period of a declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.”

The insurer would then submit a claim to the NYS Department of Financial Services (DFS) for reimbursement, which would be funded by a general assessment against every company doing insurance business in New York State. This bill was subsequently amended and expanded to cover employers with less than 250 full-time employees. A companion bill (S8211) has been introduced in the NYS Senate, and both bills have been referred to their respective Insurance Committees.

A similar bill, Bill No. S8178, was introduced in the NYS Senate on April 13. This bill has coverage requirements and a reimbursement procedure similar to the NYS Assembly bill, but would apply only to employers with less than 100 full-time employees. Another bill, Bill No. A10327, was introduced in the NYS Assembly on April 22. This bill is also similar in requiring business interruption coverage and reimbursement procedures, but only applies to certain mental health, substance-use disorder treatment, family service, and home care providers.

Lastly, NYS Governor Andrew Cuomo issued an executive order on March 29, and the DFS has issued emergency regulations consistent with that order, including, among others:

  • Imposing a moratorium on cancelling, non-renewing, or conditionally renewing any property or casualty insurance policy for 60 days if the policyholder faces financial hardship as a result of COVID-19 (based solely on the policyholder’s written statement)
  • Waiving late fees, prohibiting reporting negative data to credit-reporting agencies, and allowing the repayment of late premiums over a one-year period
  • Requiring every insurer to provide a notice with each insurance premium bill of these provisions and a toll-free number to discuss billing and making alternative payment arrangements
  • Requiring every insurance producer to provide a notice of these provisions to its customers

Several other states have introduced similar regulations and proposed legislation, including California, Louisiana, Massachusetts, Illinois, and New Jersey. At this stage, it is unclear whether any of the proposed legislative solutions will become law.

Finally, the number of lawsuits by policyholders seeking coverage from their insurers for business interruption losses continues to increase in state and federal courts across the country. A few businesses have sought to consolidate federal suits in multi-district litigation, and others have filed proposed class actions for claims involving the same insurer(s). The interpretation of business interruption insurance policies by the courts could be a key factor in dealing with the economic fallout of the pandemic.

Barclay Damon will continue to monitor these developments.

If you have any questions regarding the content in this alert, please contact Tony Piazza, Insurance Coverage & Regulation Practice Area chair, at; Joe Wilson, counsel, at; or Sanjeev Devabhakthuni, counsel, at  

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