4-2-20 New York Legislators Introduce Bill to Require Insurers to Pay COVID-19 Business Interruption Claims Even Where Policies Include a Virus Exclusion

On March 27, 2020, a bill was introduced in the New York State Assembly that would require insurance carriers who provide business interruption coverage to pay insured businesses for damage claims due to the Covid-19 pandemic. Similar bills have been proposed recently in other states.

The bill, introduced by Assembly members Robert Carroll and Patricia Fahy, essentially negates the Virus Exclusion:

• Notwithstanding any provisions of 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, shall be construed to include among the covered perils under that policy, coverage for business interruption during a period of a declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.

(A10226, March 27, 2020).

While the proposed bill does not expressly mention the Virus Exclusion, the language of the proposed bill can easily be read to nullify that exclusion in order to allow insureds to secure coverage for business interruption attributable to the state of emergency declarations from state and local authorities.

The proponents of the bill also included a provision allowing insurers forced to pay for claims contemplated by the bill to seek reimbursement from the Department of Insurance using funds from a "special purpose apportionment" that the Superintendent would be authorized to collect from insurers doing business in New York State. This aspect of the bill may have been inserted to try and insulate the legislation from legal challenge. Critics of similar bills offered in other states have pointed out that an enactment which purports to change the terms and conditions of an existing contract, like an insurance policy between an insurance carrier and its insured, may be subject to challenge because the law would violate the Contract Clause of the United States Constitution.

Please continue to check our website for further updates on this subject and other issues related to the COVID-19 crisis. For further information regarding business interruption insurance coverage for losses stemming from the pandemic, call Dan O'Brien at (585) 987-2810 or Greg Broikos at (585) 987-2805.