Reinsurers’ potential liability for retroactive COVID-19 business interruption coverage
Many insurance policies covering business interruptions require “physical loss of or damage to property,” and some contain explicit virus exclusions. As such, the extent to which COVID-19-related business interruptions would trigger coverage under those policies remains unclear.
In response, legislators in New Jersey, Ohio, Massachusetts, New York, Pennsylvania, Louisiana and South Carolina have proposed laws that would impose liability on insurers for such business interruptions without regard to whether there is physical property damage or a virus exclusion in the policy. As the economic toll grows, it seems likely more states will join in—indeed, during the writing of this article, the list of states where legislation has been introduced has been updated several times. In addition, members of Congress have urged insurers to “recognize financial loss due to COVID-19 as part of policyholders’ business interruption coverage,” in spite of physical damage requirements.
Others have proposed legislatively declaring the crisis a “qualifying event for all existing . . . business interruption insurance policies," suggesting the federal government might join state efforts. The insurance industry has responded with strong opposition to the proposals to expand coverage retroactively: “Business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19.
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For more information please contact Andy Foreman, Teresa Snider or any member of Porter Wright’s Reinsurance Litigation & Arbitration Practice Group.