COVID-19 Business Interruption Insurance Coverage Update
New Jersey’s Bill A-3844, introduced on March 16, 2020, continues to be held from a floor vote in New Jersey’s General Assembly due to ongoing negotiations with representatives of the insurance industry. The bill would have forced insurance companies to pay COVID-19 related Business Interruption (“BI”) claims even when “viruses” are specifically excluded from BI policies. Other states have begun to take New Jersey’s lead and have introduced similar bills. New York introduced bill A. 10226 which would require insurers to cover “business interruption during a period of a declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.” In Ohio, H.B. 589 would require insurers offering business interruption insurance to cover losses attributable to viruses and pandemics. In Massachusetts, SD 2888 would require certain insurance companies in the commonwealth to provide business interruption insurance coverage to their insured in connection with the COVID-19 pandemic. And likewise, in Pennsylvania, a member of the General Assembly has requested that the Pennsylvania House of Representatives draft a resolution urging Congress to reimburse BI claims as part of the federal COVID-19 relief package.
Other businesses have taken it upon themselves to file lawsuits in various courts across the country in order to get declaratory judgment rulings. On March 24, 2020, a Native American tribe that owns and operates multiple commercial businesses and services located in Oklahoma filed suit against 15 of its insurance companies seeking the Court to declare that its insurance policies cover losses and expenses related to COVID-19. On March 25, 2020, a famed Napa Valley restaurant filed suit against its insurance company seeking the Court to rule that the insurer must cover the BI losses due to government-mandated closures tied to COVID-19 (French Laundry Partners LP et al v. Hartford Fire Insurance Co. et al.). These cases are the more recent examples of businesses looking to the Court for assistance following the first lawsuit filed by a restaurant in New Orleans against its insurance company (Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd’s London, et al., Civil District Court for the Parish of Orleans, Louisiana).
While some states have introduced bills to get insurance companies to pay for BI coverage, other states have asked insurance companies to submit information surrounding BI policies provided to insureds. On March 27, 2020, the California Department of Insurance asked insurance companies to submit data regarding coverage of commercial BI related to COVID-19. These responses are due by April 9. Prior to this, New York State Department of Financial Services issued instructions on March 10, 2020 seeking explanations regarding the commercial property insurance each insurer has written in New York as well as details of BI coverage provided.
Notwithstanding the mechanism of recovery – whether through insurance or by state or federal law - businesses should proactively set up separate accounts in their internal accounting system and collect financial documents to support any losses related to COVID-19 expenses, such as:
- Historical and current annual financial statements
- Federal and state annual tax returns
- Monthly profit and loss statements
- Budgets, forecasts, or projections done prior to and after the event
- Monthly bank statements
- Inventory reports
- Payroll records
- Invoices and purchase orders
- General ledger accounts established to account for any expenses related to the loss such as additional payroll, shipping, temporary facilities, etc.
- Documentation to support extra expenses including receipts, invoices, time sheets, advertising costs, etc.
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