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COVID-19 business interruption legal action expands

26th March 2020 - Author: Matt Sheehan

US states Massachusetts and Ohio have joined New Jersey in pushing for legal action to eliminate ‘virus’ exclusions on existing business interruption insurance policies.

Legislation is aiming to provide more financial support for smaller businesses affected by the ongoing coronavirus (COVID-19) outbreak, which has now reached almost 70,000 cases in the US.

According to law firm Goldberg Segalla, the New Jersey General Assembly may be set to imminently vote on an updated version of its COVID-19 business interruption bill.

Analysts at Credit Suisse explained that the updated bill would require all property insurance policies that legally provide coverage for the loss of use of property and for occupancy and business interruption to be interpreted as including business interruption coverage due to COVID-19.

Under the bill, insurers paying out COVID-19 claims under the potential new law would be eligible to file for reimbursement/relief with the New Jersey state Commissioner of Banking and Insurance.

The costs would then be passed on and shared among insurers operating in New Jersey in the form of the already established annual special purpose apportionment that insurers pay annually to fund the state’s Division of Insurance.

The law would retroactively go into effect as of March 9th, 2020, and would apply to insured businesses with less than 100 employees working 25+ hour weeks.

The state of Ohio similarly introduced House Bill 589, requiring business interruption policies covering businesses with less than 100 employees working 25+ hours per week to include coverage “for business interruption due to global virus transmission or pandemic during the state of emergency.”

Additionally, Credit Suisse noted that, somewhat like in NJ, insurers paying out COVID-19 claims under the potential new law would be eligible to file for reimbursement/relief with the Ohio Superintendent of Insurance.

The costs would be passed on and shared among insurers operating in Ohio in the form of an assessment that insurers would pay, with relative amounts to be set in proportion to the amount of premiums written in the state.

And in Massachusetts a similar bill has been added that goes even further, stretching to firms with less than 150 employees, according to law firm White and Williams.

New York Mayor Bill DeBlasio and New Orleans Mayor LaToya Cantrell have also both put language in their civil authority shutdown orders stating that the virus is causing property damage, enabling businesses to claim on standard BI policies.

And elsewhere in the US, businesses are taking insurers to court over their refusal to pay out on some policies.

In one notable example, the Chicksaw Nation – a Native American tribe in Oklahoma – has filed a lawsuit against several underwriters at Lloyd’s of London, as well as a unit of AIG, and AXA XL.

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