Ohio Bill Would Expand Business Interruption Coverage During COVID-19 Emergency

Two Democratic state representatives in Ohio have filed a bill in the General Assembly that would require insurers that provide business interruption insurance to cover losses that arise from viruses and pandemics, regardless of whether their policies contain exclusions for such risks.

House Bill 589 would be in effect only during the state of emergency ordered by Gov. Mike DeWine on March 9, 2020, in response to the COVID-19 pandemic.

The bill was filed by Rep. John M. Rogers, District 60, and Rep. Jeffrey Crossman, District 15. It states in part: “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 section, 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.”

HB 589 would apply to businesses located in Ohio, that have 100 or fewer eligible employees, and have been issued an insurance policy that includes coverage for business interruption.

The legislation provides for reimbursement to individual insurers that pay claims for business interruption that arise out of the COVID-19 pandemic. Money for the reimbursements would be available through a newly created Business Interruption Insurance Fund, which would be funded by assessments “to insurers engaged in the business of insurance Chapter 3937. of the Revised Code,” the bill states.

The Ohio bill is similar to ones that have been filed in other states, including Massachusetts (SD 2888) and New Jersey (A-3844). The New Jersey bill was set for a vote on March 16 but was subsequently withdrawn.

Though there has been significant discussion around the topic of business interruption coverage and the business closures that have been ordered as a result of the COVID-19 nationwide health emergency, the insurance industry seems is in general agreement that BI coverage does not apply in cases were losses arise from a pandemic. Insurers point to, among other things, the physical damage trigger in most BI policies, as well as exclusions for pandemics and viruses.

Dean Fadel, president of the Ohio Insurance Institute said in an email to Insurance Journal that the trade organization is opposed to HB 589.

“The COVID-19 pandemic will not impact tornadoes, hurricanes, theft, vandalism, home fires and auto crashes. The ability of insurers to pay those claims would be jeopardized by House Bill 589 because extending business interruption insurance coverage where it was never intended would likely wipe-out a number of Ohio insurance companies,” Fadel wrote.

He said the bill could potentially negatively impact the ability of small businesses “to receive approval for loans and grants provided through the Small Business Administration (SBA),” because of the administration’s prohibition against “double-dipping on the same loss.”

Fadel added that the OII was “cautiously optimistic” that HB 589 would not gain significant traction in the General Assembly.

In a statement released by the National Association of Mutual Insurance Companies (NAMIC), President and CEO Charles M. Chamness said calls for the insurance industry to provide coverage for perils that are excluded in a business interruption policy are misguided.

“If elected officials require payment for perils that were excluded, never underwritten for, and for which no premium was ever collected, catastrophic results will occur and we may deal with a second crisis: insurance insolvencies and impairments. There will also be irreparable harm done to contract law, and the impact of this will be felt by every business in America,” Chamness said.

At least two high-profile lawsuits have been filed by restaurants in different states challenging the denial by their insurers of business interruption coverage after the restaurants were forced to close by local and state authorities due to the COVID-19 pandemic. A lawsuit has been filed against The Hartford by Thomas Keller, owner of the French Laundry and the Bouchon Bistro in the Napa Valley community of Yountville, seeking a declaration that the owner’s commercial insurance policy covers losses caused by a statewide business shutdown ordered to prevent the spread of coronavirus. A similar suit was previously filed against a Lloyd’s of London insurer by the Oceana Grill in New Orleans.

By press time, Ohio Reps. Rogers and Crossman had not replied to emailed requests for comments about their bill.

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