Client Alert: New Business Interruption Insurance Bill Filed in Massachusetts
On March 24, 2020, in response to the severe financial impact of the COVID-19 pandemic on hotel, restaurant and retail businesses in the Commonwealth of Massachusetts, Sen. James B. Eldridge, a State Senator from the Middlesex and Worcester district, filed S.D. 2888, a bill entitled “An Act Concerning Business Interruption Insurance.”
If enacted, the bill would provide critically needed revenue to retailers and owners of hotels and restaurants in the Commonwealth of Massachusetts through a mandate that requires insurers who have written insurance policies for business interruption insurance to pay policyholders who have had their businesses interrupted as a result of the COVID-19 pandemic. The bill requires insurers to approve claims for business interruption insurance, notwithstanding (a) any virus exclusions or (b) policy requirements that there also be property damage accompanying the business interruption.
The bill would apply to hotels, restaurants, and other businesses, provided that the bill only covers businesses with 150 or fewer full-time-equivalent employees. It is unclear if such an employee cap is intended to apply on a per-location or on an aggregate employee basis. We expect that such ambiguity will be resolved as the bill moves to committee. If enacted, the mandate for insurers to provide such coverage would cease to be effective when the order issued by Governor Charlie Baker on March 10, 2020, declaring a state of emergency in connection to the COVID-19 pandemic, is rescinded.
The coverage mandated by the bill is subject to the monetary limits in each applicable policy and allows insurers to seek reimbursement for the costs of such newly mandated coverage from the Massachusetts Division of Insurance. To fund such reimbursements, the bill grants the Commissioner of the Division of Insurance authority to make “one or more” assessments against domestic and foreign insurance companies licensed in Massachusetts, provided they sell business interruption insurance. The bill does not specifically proscribe the amounts of such assessments, or when such assessments may commence. Such decisions are left to the Commissioner of the Division of Insurance, although it seems likely that such assessments would not begin until after the COVID-19 crisis is over, and that they would ramp-up over time.
There is much that is not yet known about this bill. However, we wanted to update you on its recent filing.