New York Lawmakers Introduce Bill That Would Force Insurers To Pay COVID-19 Business Interruption Claims – Even if the Policy Contains a Virus Exclusion

April 1, 2020

New York is the latest state to introduce a bill that would obligate business interruption insurers to retroactively cover business interruption claims as a result of COVID-19. This follows similar bills that had been introduced over the last couple of weeks by lawmakers in New Jersey, Massachusetts and Ohio.

On March 27, 2020, New York Assembly members Robert Carroll and Patricia Fahy introduced bill A. 10226, which states:

Notwithstanding any provisions of law, rule or regulation to the contrary, every policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption, shall be construed to include among the covered perils under that policy, coverage for business interruption during a period of a declared state of emergency due to the coronavirus disease 2019 (COVID-19) pandemic.

The bill, if passed, would apply retroactively to insurance policies in force on March 7 (the date Governor Cuomo announced a state of emergency), and issued to businesses with fewer than 100 “eligible employees,” i.e. full-time employees who work at least 25 hours per week. It would require insurers to pay claims “subject to the limits under the policy, for any loss of business or business interruption for the duration of a period of a declared state emergency” due to the COVID-19 pandemic.

Under the proposed legislation, insurers that pay out business interruption claims can seek reimbursement from the New York Superintendent of Insurance, which would be funded by a “special purpose apportionment” that the Superintendent would be authorized to collect from all insurers doing business in the state.

The bill has been referred to the Assembly Committee on Insurance. 

This New York bill, and the other similar bills introduced in New Jersey, Ohio and Massachusetts, have been met with swift backlash from the insurance industry. Insurers claim that the bills set a dangerous precedent by essentially forcing insurers to re-write or ignore policy provisions such as a virus exclusion that had been approved by state regulators, as well as the typical policy requirement of “physical loss or damage” to property. Insurers have also expressed concern that these bills are unconstitutional as they violate the Contracts Clause of the U.S. Constitution which limits states’ ability to interfere with private contracts. 

It is likely that additional states will follow New York’s lead and introduce similar bills. These bills, if passed, will undoubtedly face legal and constitutional challenges by the insurance industry.


Excerpts of this article appeared in the April 2, 2020 JCK article Should You Apply for Business Interruption Insurance?

Herrick’s Insurance Group is experienced in reviewing and analyzing such policies and coverages. For more information on this and other insurance matters, please contact:

Alan R. Lyons at [email protected] or +1 212.592.1539

© 2020 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.