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State Insurance Commissioners Issue Notices Regarding Business Interruption Coverage

The insurance commissioners of various states including Arkansas, Georgia, Kansas, Maryland, North Carolina and West Virginia recently issued letters, bulletins and press releases regarding business interruption coverage. Notably, several Insurance Commissioners’ notices specify that COVID-19 claims will likely not be covered due to virus exclusions. The high points of these communications are summarized below. 


On March 23, 2020, the Arkansas Insurance Department issued Bulletin No. 9-2020 to inform consumers about business interruption insurance coverage relative to the current COVID-19 health emergency. In the bulletin, the Department explained that in business interruption policies, coverage is triggered only when the policyholder sustains “physical damage to insured property” caused by a covered peril resulting in a quantifiable business interruption loss.” (Emphasis in original.) Further, the Arkansas Insurance Department specified that “virus and disease are typically NOT an insured peril unless added by endorsement.” (Emphasis in original.) 


On March 17, 2020, Georgia Insurance Commissioner John F. King issued Bulletin 20-EX-3, which described business interruption insurance coverage. The Commissioner indicated that business interruption coverage is triggered only when the policyholder sustains (1) physical damage, (2) to the insured property, (3) caused by a covered peril, (4) resulting in quantifiable business interruption loss, (5) during the time it takes to restore the damaged property. He further stated that viruses and disease are typically not an insured peril unless added by endorsement. 


On March 17, 2020, Kansas Insurance Commissioner Vicki Schmidt issued Bulletin 2020-1 regarding business interruption insurance policies. The Commissioner indicated that “it is the Department’s understanding that it is unlikely that a business policy would cover losses related to COVID-19, as most business policies have communicable disease exclusions.” 


On March 18, 2020, the Maryland Insurance Administration issued a news release in response to receiving a high volume of inquiries about business interruption insurance. In the news release, the Administration stated that business interruption coverage is typically triggered under a commercial insurance policy when a covered risk/peril causes physical damage to the insured premises resulting in the need to shut down business operations. 

North Carolina

In a letter to business owners, North Carolina Insurance Commissioner Mike Causey indicated that “standard business interruption policies are not designed to provide coverage for viruses, diseases, or pandemic-related losses because of the magnitude of the potential losses.” He further stated that “Insurability requires that loss events are due to chance and that potential losses are not too heavily concentrated or catastrophic. This is not possible if everyone in the risk pool is subject to the same loss at the same time.” Lastly, the Commissioner highlighted the fact that recent estimates show that business continuity losses from COVID-19 for small businesses of 100 employees or fewer could amount to between $220 billion to $383 billion per month. Meanwhile, the total reserve funds available to U.S. home, auto and business insurers to pay future losses is only $800 billion. The Insurance Commissioner stressed that “this type of loss could cripple the insurance industry causing many companies to fail, which would put the protection of homes, automobiles, and businesses at risk.” 

West Virginia

On March 26, 2020, West Virginia Insurance Commissioner James A. Dodrill issued Bulletin No. 20-08 regarding business interruption coverage. The Commissioner specified that business interruption coverage is “typically triggered under a commercial insurance policy when a covered risk causes direct physical loss or damage to the insured’s or policyholder’s premises resulting in the need to shut down business operations.” (Emphasis in original.) Further, the Commissioner stated that global pandemics such as COVID-19 usually fall into the category of risks or perils that are not covered because the potential loss costs from such perils would be so great that providing coverage would jeopardize the financial solvency of insurers.

© 2022 Wilson ElserNational Law Review, Volume X, Number 148

About this Author

Paul S. White Partner Insurer Litigation: Coverage/Extra-Contractual Insurance & Reinsurance Coverage Professional Liability & Services

Paul White focuses his practice on complex insurance coverage and bad faith litigation and represents defendants in commercial litigation. Paul's insurance coverage practice includes advising and representing insurers in bad faith litigation and insurance policy disputes, including first-party property policies, general liability coverage, errors and omissions insurance, and media liability insurance. He also advises and represents insurers in subrogation actions on property losses. In addition, Paul has litigated and arbitrated disputes throughout the United States involving domestic and...

Siobhán A. Breen Associate New York Directors & Officers Liability Insurance & Reinsurance Coverage

Siobhán A. Breen represents primary and excess professional liability insurers and drafts coverage opinions with respect to complex insurance coverage matters involving directors and officers liability, errors and omissions liability, miscellaneous professional liability, lawyers professional liability, and employment practices liability.

Prior to joining Wilson Elser, Siobhán’s practice consisted of insurance coverage and insurance defense litigation. Siobhán has experience in securities class actions, shareholder derivative actions, cyber/privacy actions, and professional...