Massachusetts is among many states whose legislatures have filed proposed legislation to require insurance companies to provide coverage to Massachusetts policyholders for business interruption losses due to the COVID-19 pandemic. The American Property Casualty Insurance Association (“Insurance Association”) is fighting back; arguing that such legislation will overwrite existing insurance contracts and place a major financial burden on insurance companies. The figures provided by the Insurance Association to date regarding that burden, however, appear to be drastically exaggerated and inflated and insurers across the country are simply denying each and every claim, whether warranted or not. Many insurance policies were issued without virus exclusions and it is even questionable whether the most frequently used virus exclusions apply to the present government shutdown of non-essential business.
Massachusetts’ Bill S.2655 would apply to insurance policies issued to businesses with 150 or fewer full-time employees and would provide coverage for losses during the shutdown created by the Governor’s Emergency Executive Order 591. Under the proposed law, “no insurer in the Commonwealth may deny a claim for the loss of use and occupancy and business interruption on account of (i) COVID-19 being a virus (even if the relevant insurance policy excludes losses resulting from viruses)…” Massachusetts laws against unfair methods of competition and unfair and deceptive acts and practices in the business of insurance will apply to the Act, if and when it’s passed, which could result in increased liability to insurers who do not follow the law.
Bill S.2655 has been referred to the Joint Committee on Financial Services and there is no clear indication that Bill S.2655 will be eventually be enacted into law. However, this law is not necessary to validate every claim to receive business interruption coverage arising out of the pandemic. Some policies, currently in effect, already provide business interruption coverage that would apply to losses as a result of the COVID-19 pandemic. Absent this law, whether a business can be afforded coverage or not will likely be decided on the wording of the individual insurance policies.
SUGARMAN’s litigation attorneys have a long history of representing clients in claims against insurance companies. If you believe that you may have a claim for a disruption to your business that is covered by an insurance policy, we would be happy to speak to you. Please contact us at 617-542-1000 or email us at info@sugarman.com to connect with a principal today.