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Massachusetts Business Interruption Insurance Bill

According to its preamble, Senate Bill No. 2888, which has been introduced in the Massachusetts State Senate and sent to committee, would “require certain insurance companies in the commonwealth to provide business interruption insurance coverage to their insured (sic) in connection with the COVID-19 pandemic.”  By Section 1(a) of this act, every policy which insures against loss or damage to property, loss of use and occupancy, and business interruption “shall be construed to include among the covered perils under such policy coverage for business interruption directly or indirectly resulting from” COVID-19.  This section also precludes an insurer from denying a claim for loss of use and occupancy and business interruption because COVID-19 is a virus (even if the policy excludes losses due to viruses) or because there is no physical damage to the property.  The bill makes no mention of other potential coverage defenses, such as the exclusion for “loss of market,” but the intent to avoid all coverage defenses seems clear.

The coverage to be afforded in accordance with the act is limited only by the monetary limits stated in the policy or the maximum period of time for business interruption coverage, unless the Governor rescinds his declaration of an emergency sooner.  The act would also apply only to insureds with 150 or fewer full-time employees in Massachusetts and to policies in effect when or after the law is enacted until the Governor’s emergency declaration is rescinded. 

Section 2(a) of the bill would permit an insurer, which is required under the act to pay a claim, to apply to the Commissioner of Insurance for reimbursement.  Section 3 provides that the Commissioner is authorized to make one or more assessment(s) in each fiscal year against licensed insurers in Massachusetts who sell business interruption insurance.  The assessment will be calculated by the Commissioner, who shall certify that the rates charged will be “sufficient to recover the amounts paid to insurers.”  The assessments shall be applied “against all licensed domestic companies and foreign companies in proportion to their net premiums written and annuity considerations in the commonwealth.”  Finally, these assessments “shall be charged to the normal operating cost of each company.”  Accordingly, this bill would seek to make the insurers (and presumably their insureds ultimately), rather than the general public, responsible to pay for these losses.  However, it is unclear if this bill will be enacted and/or whether it would pass judicial scrutiny, particularly as it changes existing contract terms.

Please do not hesitate to contact us if you have any questions about how this bill may affect you, your insureds, or your business.