The Louisiana Legislature has joined a number of other states—including New York, New Jersey, Massachusetts, and Ohio—in introducing legislation that would require business interruption insurance to retroactively cover business losses attributable to the COVID-19 pandemic.
La. House Bill 858 was introduced on March 31, 2020, by Rep. Royce Duplessis to retrospectively require business insurance policies to cover losses due to the COVID-19 pandemic. The bill would require insurers to indemnify policyholders, subject to the limits of the policy, for loss of business or business interruption, retroactive to March 11, 2020, to apply through the duration of the public health emergency. This proposed law would only apply to insureds with less than one hundred full-time employees and for policies which are in force as of the effective date of the act.
La. Senate Bill 477, introduced by Sen. Rick Ward, III, likewise provides for the retroactive application of business interruption coverage from March 11, 2020 to claims due to the statewide public health emergency caused by COVID-19. This bill also leaves policy limits unchanged and applies through the duration of the declared state of emergency. This proposed legislation is also limited to businesses with less than one hundred full-time employees. This bill goes beyond the House version and requires that all business interruption polices issued or delivered in Louisiana beginning August 1, 2020 include a notice of all exclusions.
La. Senate Bill 495 was introduced on March 31, 2020, by Sen. Troy Carter to create a Business Compensation Fund for the purpose of providing a method for expediting property insurance claims and to provide coverage for COVID-related losses. This bill would require participating insurers to contribute at least $50 million (or 8% of its aggregate policy limits, whichever is greater) to be held in trust by the State. As a member of the Fund, an insurer would be entitled to immunity from bad faith claims in Louisiana. Insureds with business interruption claims would submit claims directly to the Fund for payment of losses. However, the maximum recovery would be 80% of commercial losses, subject to policy limits.
American Property Casualty Insurance Association (APCIA) estimates that there could be as many as 30 million claims from small businesses for coronavirus losses, which could amount to $220-383 billion per month. This is ten times the number of claims handled by the industry in its busiest year. By comparison, the catastrophic 2005 hurricane season, which included Hurricanes Katrina, Rita, and Wilma, resulted in three million claims. The APCIA has also stated that the combined capital of the top business insurance underwriters comprises only a fraction of expected losses from the coronavirus from just small businesses. To that end, the National Association of Insurance Commissioners issued a statement cautioning against and opposing “proposals that would require insurers to retroactively pay unfunded COVID-19 business interruption claims that insurance policies do not currently cover.”
Riess LeMieux will continue to monitor proposed legislation related to COVID-19 and the actions of insurance companies and industry groups to limit their exposure.