Insurance Alert: Ohio Legislature Introduces Bill Regarding COVID-19 Business Interruption Losses | Brouse McDowell | Ohio Law Firm
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Insurance Alert: Ohio Legislature Introduces Bill Regarding COVID-19 Business Interruption Losses

By Amanda M. Leffler on March 26, 2020

On March 24, 2020, the Ohio Legislature introduced House Bill 589, the purpose of which is to “protect small businesses from catastrophic losses” arising from the COVID-19 pandemic. As drafted, the Bill purports “[t]o require insurers offering business interruption insurance to cover losses attributable to viruses and pandemics…..” If enacted in its current form, H.B. 589 would require that every property insurance policy providing business interruption coverage be construed to provide “coverage for business interruption due to global virus transmission or pandemic during the state of emergency.” H.B. 589 contains little detail, but its requirement that COVID-19 be considered a “covered peril” has sweeping implications:

  • Insurers have asserted that property policies only cover damage to or destruction of property. As drafted, the Bill would require policies to be construed to recognize that COVID-19 does cause, and has caused, physical damage, notwithstanding insurers’ argument that property has not experienced structural alteration as result of the virus.
  • Some property policies include exclusions that purport to preclude coverage for loss or damage resulting from a virus or bacteria. Though such exclusions are not specifically referenced, as drafted, the Bill appears to require that the policies nonetheless be construed to provide coverage.
H.B. 589’s protections would only be afforded to Ohio’s small businesses: i.e., only if (1) the business in question is located in the State of Ohio, (2) the business employs less than 100 “eligible” employees (a full-time employee working at least twenty-five hours per week), and (3) the business was covered by business interruption insurance as of the date that the law becomes effective. If an insured meets the foregoing criteria, insurers would be required to indemnify the insured, up to the policy’s limits, for the duration of the state of emergency which began on March 9, 2020.

Insurers providing coverage as mandated by the Bill would be entitled to seek reimbursement from the Superintendent of Insurance. The State, in turn, would pay the insurers’ claims for reimbursement either by utilizing “available” funds, or by charging an assessment to insurers engaged in the business of insurance in the State of Ohio to create a “Business Interruption Insurance Fund” for this purpose.

Insurers can be expected to swiftly voice their opposition to this legislation, as they have done in response to similar bills introduced or proposed at the federal level and in other states, such as New Jersey. In a March 18th letter to leaders of various insurance trade groups, for example, eighteen members of the U.S. House of Representatives urged insurers “to work with your member companies and brokers to recognize financial loss due to COVID-19 as part of policyholders’ business interruption coverage.” In response, the insurers wrote: “Standard commercial insurance policies offer coverage and protection against a wide range of risks and threats and are vetted and approved by state regulators. Business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19.”

The insurers’ contention that there is no coverage for COVID-19 losses is overly-broad in its own right. Some policies may, in fact, provide coverage for COVID-19 losses, as we discussed here. But it is equally true that some policies will not provide such coverage under the interpretation insurers typically apply to the relevant policy language. S.B. 589, however, would effectively render the insurers’ arguments moot by eliminating viral exclusions and by siding with numerous courts that have found that similar air-borne, surface inhabitants (i.e., smoke, fumes, odor) constitute “physical loss or damage.”

Insurers are likely to raise the same objections to S.B. 589 that they have raised in response to similar legislative efforts in states like New Jersey, including constitutionality and the impact on the insurance market as a whole. Unfortunately, there is no easy solution to the economic crisis that is developing as a result of the COVID-19. Insurance coverage can be an important asset in recovering under certain circumstances. Still, a state-wide mandate of “coverage-for-all” could have far-reaching implications that merits careful deliberation.

Brouse McDowell will provide updates on S.B. 589 as the discussion surrounding it unfolds. We continue to advise our clients to analyze their insurance policies with their counsel to determine if coverage is available to them.

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