Insurance Coverage for Pandemic-Related Business Interruption Losses: Legislative Tracker (US): 2022 | Practical Law

Insurance Coverage for Pandemic-Related Business Interruption Losses: Legislative Tracker (US): 2022 | Practical Law

A chart summarizing key legislative efforts to protect commercial insureds from the economic impacts of the ongoing COVID-19 pandemic and future pandemics, including attempts to guarantee business interruption insurance coverage for COVID-19-related lost business income. The resource includes summaries of federal and state developments from January 1, 2022 until December 31, 2022.

Insurance Coverage for Pandemic-Related Business Interruption Losses: Legislative Tracker (US): 2022

by Practical Law Commercial Transactions
A chart summarizing key legislative efforts to protect commercial insureds from the economic impacts of the ongoing COVID-19 pandemic and future pandemics, including attempts to guarantee business interruption insurance coverage for COVID-19-related lost business income. The resource includes summaries of federal and state developments from January 1, 2022 until December 31, 2022.

Availability of Business Interruption Insurance Coverage for COVID-19 Related Losses

Over two years into the COVID-19 pandemic, federal and state legislators continue to propose legislation to:
  • Cover COVID-19 related business interruption losses under existing policies.
  • Offer insurance for pandemic-related business interruptions in the future.
This resource tracks proposed legislation to guarantee coverage for pandemic-related losses at the state and federal level in 2022. Commercial entities can use this resource to determine:
  • Whether pending legislation can help them obtain coverage for their COVID-19-related losses.
  • Whether pending legislation can help them purchase coverage for public health emergencies or other catastrophic events in the future.
Insureds should not, however, assume all of these legislative efforts will survive industry and constitutional challenges. To preserve their rights and options, insureds should comply with all policy notice requirements and document their business interruption losses carefully, including the jurisdiction in which the losses occurred.
For the 2020 and 2021 version of this tracker, see Practice Note, Insurance for COVID-19 Related Business Income Losses: Key Legislative and Regulatory Developments Tracker (US): 2020 and 2021.
For charts tracking key COVID-19-related insurance coverage lawsuits, see Practice Note, Key COVID-19 Insurance Coverage Cases Tracker (US): 2022 and Practice Note, Key COVID-19-Related Securities Cases Implicating the Availability of D&O Insurance: 2022 Tracker.
For additional guidance on the business impacts of COVID-19, see Commercial Global Coronavirus Toolkit.

Business Interruption Insurance for Pandemic Losses: Federal Legislative Developments (2022)

Federal legislators proposed various pandemic relief bills in 2020 and 2021. However, only one is still begin considered: the Pandemic Risk Insurance Act (PRIA). PRIA is purely prospective. It does not provide any relief to commercial entities that suffered otherwise uninsurable COVID-19 business interruption losses (that is, PRIA does not require insurers to provide coverage for COVID-19 losses if the terms and conditions of a commercial entities' insurance policies otherwise would not provide coverage). Instead, PRIA:
  • Requires insurers to offer business interruption policies that cover future public health emergencies, including pandemics.
  • Creates a federally-backed reinsurance programs to protect insurers from excessive losses.
For summaries of all the federal legislative efforts to mandate insurance for pandemic-related risks, see Practice Note, Insurance for COVID-19 Related Business Income Losses: Key Legislative and Regulatory Developments Tracker (US): 2020 and 2021: Key Federal Legislative Developments.

Pandemic Risk Insurance Act 

Date
Legislative Development
November 2, 2021
H.R. 5823  
Title: To establish a Pandemic Risk Reinsurance Program, and for other purposes.
Current Status: Referred to the House Committee on Financial Services
Summary: Representative Carolyn Maloney (D-NY) introduced the second version of the Pandemic Risk Insurance Act (PRIA) on November 2, 2021. She introduced the first version, H.R. 7011, the Pandemic Risk Insurance Act of 2020 (PRIA), on April 3, 2020. The bill:
  • Establishes a pandemic risk insurance program.
  • Requires insurers to offer pandemic risk coverage in key commercial lines of insurance, including business interruption and event cancellation.
For more information, see the April 3, 2020 entry on the 2020 and 2021 legislative tracker, Practice Note, Insurance for COVID-19 Related Business Income Losses: Key Legislative and Regulatory Developments Tracker (US): 2020 and 2021: Key Federal Legislative Developments (summarizing PRIA).

Business Interruption Insurance for Pandemic Losses: State Legislative Developments (2022)

Washington is the first state to introduce legislation to compel insurers to provide business interruption coverage for COVID-19 losses in 2022. In 2021, twelve states and the District of Columbia introduced such legislation. Unlike PRIA, generally this state-level legislation compels insurers to provide coverage for their COVID-19 losses under existing business interruption polices.
The proposed state laws share certain common features, including that they:
  • Aim to broaden business interruption coverage under existing insurance policies to require coverage for COVID-19-related business interruption losses regardless of the policy's terms and conditions.
  • Apply retroactively, including by mandating that the legislation applies:
    • retroactively to a specific date (for example, the date of a governor's COVID-19 emergency declaration); and
    • to policies in effect as of a date certain or the date the legislation is enacted.
  • Change policies' physical damage requirement, including by:
    • redefining "property damage" to include the presence of a person infected with COVID-19 on the policyholder's premises, in the same municipality as the policyholder, or in the same state as the policy holder;
    • prohibiting insurers from denying a COVID-19-related business interruption claim on the basis that there was no physical damage to property or on the basis that an exclusion applies; and
    • requiring insurers to cover COVID-19 damages, regardless of policy language (including physical damage requirements).
  • Apply only to small businesses; for example:
    • the most restrictive bills apply to insureds with fewer than 100 full-time employees; and
    • the most expansive applies to insureds with fewer than 250 employees.
  • Include funding provisions that allow insurers to apply to the state for reimbursement from a fund which is financed by assessments against insurers.
For summaries of all the state legislative efforts to mandate COVID-19 business interruption insurance coverage in 2020 and 2021, see Practice Note, Insurance for COVID-19 Related Business Income Losses: Key Legislative and Regulatory Developments Tracker (US): 2020 and 2021: Business Interruption Insurance for COVID-19: Key State Legislative and Regulatory Developments (2020 and 2021).

Washington

Date
Legislative Development
January 10, 2022
Title: Concerning business interruption insurance claims (2022 WA S.B. 5351) 
Current Status: Re-introduced
Summary: On January 10, 2022, legislators in Washington re-introduced SB 5351 in its original form. They first introduced this bill in 2021 but it did not pass out of the Committee on Business, Financial Services, and Trade before the end of the 2021 legislative session, which effectively killed it. 
SB 5351 helps small businesses trying to recover COVID-19-related claims under business interruption insurance policies by codifying favorable language in recent policyholder-friendly court rulings and by giving small businesses an additional year to challenge the denial of COVID-19-related business interruption claims (beyond the current one-year limit).
Specifically, the bill states: "Every property insurance policy containing a grant of coverage for direct physical loss of or damage to property shall be construed to include the deprivation of such property and the loss of the ability to use such property." It would apply to all causes of action commenced on or after the bill's effective date, "regardless of when the cause of action arose," and applies retroactively to February 29, 2020 (the date Washington state declared a state of emergency). 
For more information, see Practice Note, Insurance for COVID-19 Related Business Income Losses: Key Legislative and Regulatory Developments Tracker (US): 2020 and 2021: Washington.