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Ohio lawmakers have joined New Jersey in introducing a bill that would force insurers to retroactively cover business interruption losses arising from COVID-19.
Ohio state Representatives Jeffrey Crossman and John M. Rogers on Tuesday introduced H.B. 589 which would require insurers offering business interruption insurance to cover losses attributable to viruses and pandemics on policies that were in-force by March 9.
The bill would apply to policies issued to businesses that are located in the state, with 100 full-time employees or fewer.
“Every policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption,” in force on the effective date, “shall be construed to include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic during the state of emergency,” the text of H.B. 589 states.
Other states, including Massachusetts and Pennsylvania, are understood to have similar legislation in the works.
If other states enact similar laws, the size of the industry loss could be “very large,” analysts at investment bank Piper Sandler & Co. said in a note Wednesday.
“We believe the largest probability is insurers will not pay these claims as contract language is generally protected by federal and state constitutions, but the political risk is real,” Piper Sandler said in the note.
Currently, viruses, pandemics and contagious/infectious diseases such as COVID-19 are generally excluded from standard form commercial property policies. Policies also require direct physical loss to property for coverage to kick in.
Insurance industry trade groups have pushed back against the growing move by states to force insurers to cover business interruption losses due to COVID-19.
The Indianapolis-based National Association of Mutual Insurance Companies issued a statement March 19 saying it is monitoring states closely to “ascertain any appetites to develop bad public policy situations in a misguided attempt to address COVID-19 impacts.”
The New Jersey bill, which was quashed but is expected to re-emerge, would have mandated “every policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption in force in this State on the effective date of this act, shall be construed to include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic,” NAMIC said in the statement.
More insurance and risk management news on the coronavirus crisis here.