Insurance Update: Legislative, Regulatory and Litigation Activity in the U.S. in Response to COVID-19: Developments Affecting Business Interruption Insurance, Workers’ Compensation and Auto Insurance

Sullivan & Cromwell LLP - May 29, 2020

The COVID-19 pandemic and related business closures continue to generate significant insurance-related legislative, regulatory and litigation activity in the U.S. Three property and casualty insurance coverages have been particularly affected by the crisis: (1) In addition to significant litigation and regulatory actions relating to business interruption insurance, bills have been proposed in a number of U.S states and the U.S. House that would, if enacted, require insurers to retroactively cover business interruption claims relating to COVID-19, irrespective of virus-related policy exclusions or policy conditions that would otherwise preclude coverage for COVID-19-related business suspensions. Legislation has also been proposed to establish a pandemic loss-sharing program between government and private insurers; in particular, the Pandemic Risk Insurance Act of 2020, modeled after the Terrorism Risk Insurance Act, was introduced in the U.S. House of Representatives on May 26. (2) A number of U.S. states have proposed or implemented emergency measures that establish a rebuttable presumption that certain defined “essential workers” who contract COVID-19 (such as first responders or healthcare workers) were exposed to the virus through their employment, and are therefore eligible for state workers’ compensation coverage for such exposure. Bills introduced in some U.S. states, and a few emergency orders that have already been issued, expand the application of the rebuttable presumption to a much larger set of employees, including employees working in grocery stores, pharmacies or other businesses that remain open during COVID-19-related “stay-at-home” orders. (3) A number of auto insurers in the United States are voluntarily providing refunds, credits or other relief to auto insurance policyholders in recognition of lower claims exposure and decreased losses from driving due to “stay-at-home” orders issued by governmental authorities. In addition, a handful of state insurance regulators have encouraged, or required, certain classes of insurers (including auto insurers) operating in their state to issue refunds, credits or discounts to policyholders.