As we wrote earlier this week, legislators continue their efforts to address the enormous cost of business continuity losses. Most recently, Representative Mike Thompson of California, introduced H.R.6494, labeled the "Business Interruption Insurance Coverage Act of 2020".
The draft Act is broad in scope. Section 1 of the draft Act requires "each insurer that offers or makes available business interruption insurance coverage" to "make available, in all of its policies providing [such coverage], coverage for losses resulting from" "any viral pandemic"; "any forced closure of business, or mandatory evacuation, by law or order of any government"; or "any power shut-off conducted for public safety purposes". The draft Act does not specifically reference or tie in such losses to coronavirus or COVID-19 response efforts.
In addition to compelling coverage, Section 2 of the draft Act renders "void" existing exclusions for losses resulting from the specific perils identified in Section 1 of the draft Act (i.e., losses resulting from "any viral pandemic"). Section 2 "preempts" any State approval of such exclusions.
Section 2 of the draft Act provides for "reinstatement" of exclusions otherwise rendered "void," under two circumstances. First, the insured may, in writing, affirmatively authorize its insurer to "reinstate" the exclusions. Second, after providing notice that the insurer intends to "reinstate" the exclusions, or increase the premium for coverage afforded consistent with Section 1 of the draft Act (i.e., coverage for coronavirus-related damages) and the insured fails to pay such increased premium, the insurer may "reinstate" the exclusions. In addition to the increased premium amount, the notice provided must include an explanation of "the rights of the insureds with respect to such coverage".
As of the date of this article, the draft Act had been referred to the House Committee on Financial Services. We continue to monitor these developing efforts.
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