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Insurance advocates raise concerns over COVID property bill

Pennsylvania covid bill

A bipartisan Pennsylvania Senate bill that does not explicitly state that insurers must cover COVID-19 business interruption claims would nonetheless force insurers to pay claims that standard property policies do not cover, according to insurance industry proponents.

SB. 1127, introduced on April 30, states that if a covered property is in a municipality where “the presence of the COVID-19 coronavirus has otherwise been detected,” that property is “deemed to have experienced property damage.”

The bill also states that Gov. Tom Wolf’s March 19 emergency order to close businesses “constitutes an order of civil authority under a first-party insurance policy limiting, prohibiting or restricting access to non-life-sustaining business locations” in Pennsylvania “as a direct result of physical damage at or in the immediate vicinity of those locations.”

The National Association of Mutual Insurance Companies said the proposal is an “unconstitutional coverage mandate in disguise.”

“While proponents of the bill argue that it does not mandate coverage, the bill instead redefines well-established terms that both insurers and their policyholders used to form their contract and calculate premiums,” Erin Collins, NAMIC’s vice president, state affairs said in an emailed statement.

“SB 1127 would in actuality require insurers to pay claims for uncovered perils for which no premium was collected,” she said.

If enacted, the bill would “effectively override many of the defenses insurers assert in response to COVID-19 related business interruption claims,” Eversheds Sutherland (US) LLP said in a legal alert earlier this week.

The bill would apply to all insurance policies active as of March 6 and follows legislative moves in numerous states attempting to mandate coverage for pandemics.

Meanwhile, the Council of the District of Columbia earlier this week decided not to go ahead with a proposal to force insurers to provide retroactive business interruption coverage on small business COVID-19 claims.

The language was struck from a broader pandemic emergency bill, known as the Coronavirus Omnibus Emergency Declaration Resolution of 2020.

The proposal had received strong pushback and raised concerns among commercial insurance buyers and insurer groups.

If enacted the proposal would “significantly disrupt that marketplace in the District with respect to the availability of insurance, as well as its coverage and price,” Mary Roth, CEO of the Risk & Insurance Management Society Inc. said in a May 5 letter to the DC city council.

More insurance and risk management news on the coronavirus crisis here