Update: Massachusetts and Ohio Join New Jersey in Considering Expanded Business Interruption Insurance Coverage

We provide this update to our earlier alert, “Litigation Issues in the Midst of COVID-19,” issued on March 25, 2020, describing, in part, the New Jersey Legislature’s consideration of a bill that would mandate business interruption insurance coverage despite viral and bacterial policy exclusions. For more information about the New Jersey bill, A-3844, and other important litigation issues resulting from COVID-19, read our alert here.

Other state legislatures are now following in New Jersey’s footsteps. In Ohio, House Bill 589 would require business interruption policies to cover losses resulting from a “global virus transmission or pandemic” regardless of policy-specific exclusions.^[1] The bill would be in effect during the state of emergency ordered by Ohio Governor Mike DeWine on March 9, 2020, and would apply only to businesses with 100 or fewer eligible employees (those who work 25 or more hours per week).^[2] The legislation also provides for reimbursement to insurers paying COVID-19 related business interruption claims. The reimbursements may be paid through a newly created Business Interruption Insurance fund, which would in turn be funded by assessments charged “to insurers engaged in the business of insurance.”^[3]

The proposed Massachusetts legislation, S.D. 2888, would operate similarly. It would require business interruption policies to cover COVID-19 related claims and prohibit insurers from denying claims due to a lack of physical damage to the insured property.^[4] If the bill is passed, coverage would be required for the duration of Massachusetts’ state of emergency — which was declared on March 10, 2020 — and would apply to businesses with 150 or fewer full-time or equivalent employees.^[5] S.D. 2888 permits insurers paying COVID-19 claims to be reimbursed, funded by assessments imposed on the state’s “licensed insurers” that sell business interruption insurance.^[6]

The New Jersey, Ohio and Massachusetts bills have been met with opposition by the insurance industry. In a statement released by the National Association of Mutual Insurance Companies (NAMIC), President and CEO Charles M. Chamness noted that such legislation could have industrywide “catastrophic results,” such as insurance insolvencies and impairments.^[7] None of the proposed bills have been passed to date. Kramer Levin will continue to monitor industry updates.

^{[1] H.B. 589, 133rd Assemb. Reg. Sess. (Ohio 2020).}

^{[2] Id.}

^{[3] Id.}

^{[4] S.D. 2888, 191st General Court (Mass. 2020).}

^{[5] Id.}

^{[6] Id.}

^{[7] COVID-19 and the Mutual Insurance Industry, National Association of Mutual Insurance Companies (March 27, 2020), https://www.namic.org/news/releases/200327mr01. See Stephanie K. Jones, Ohio Bill Would Expand Business Interruption Coverage During COVID-19 Emergency, Insurance Journal (Mar. 30, 2020), https://www.insurancejournal.com/news/midwest/2020/03/30/562691.htm.}