South Carolina and Pennsylvania have joined several other US states in pushing for legislation that would require insurers to retroactively cover business interruption losses related to the coronavirus (COVID-19) pandemic.
At the same time, New York has expanded the scope of its previously proposed legislation, while New Jersey has ordered insurers to provide policyholders with a 90-day grace period to pay premiums.
According to law firm Goldberg Segalla, South Carolina’s proposed legislation could go even further than other states by eliminating insurers’ key coverage defences to COVID-19 losses.
For example, the bill under consideration would specifically prohibit insurers from denying claims on the basis that COVID-19 is caused by a virus, even where that insurer’s policy included a clear virus exclusion.
It also provides that the South Carolina Department of Insurance will establish a fund to reimburse insurers who pay COVID-19 claims that would not otherwise have been covered under their policies.
Goldberg Segalla suggested that the bill raises some potential constitutional issues, most notably regarding the contracts clause, which generally prohibits states from passing any law “impairing the Obligation of Contracts.”
Pennsylvania also joins New Jersey, New York, Ohio, Massachusetts, South Carolina, and Louisiana in pushing for COVID-19 insurance legislation.
Like other states, the proposed legislation applies to policies that are issued to insureds with fewer than 100 eligible employees, and permits reimbursement from the Insurance Department via a special purpose apportionment that will be funded by the commissioner’s collection of additional funds from insurers providing property and casualty insurance within the state.
And New York has now substantially amended and reintroduced a bill to expand the class of policyholders from those with 100 or fewer eligible employees to those with 250 or fewer.
According to Goldberg Segalla, the new bill clarifies that it applies to policies insuring against loss or damage to property, “which includes, but is not limited to,” the loss of use and occupancy and business interruption.
Others new provision require that any policy set to expire during the state of emergency is automatically renewed at the same rate, and that any policy provision “which allows the insurer to deny coverage based on a virus, bacterium, or other microorganism that causes disease, illness, or physical distress or that is capable of causing disease illness, or physical distress shall be null and void.”
And finally, in New Jersey, the Commissioner of Banking and Insurance has issued a bulletin in which insurance carriers were encouraged to take steps to assist policyholders affected by job loss and other effects of the recent shutdown orders.
Governor Murphy’s most recent order now mandates that property and casualty insurance carriers provide a 90-day grace period to policyholders to pay premiums during which time the carrier cannot cancel or refuse to renew a policy for non-payment of premiums.
