Louisiana is home to the first coverage lawsuit filed as a result of the coronavirus pandemic. Now, Louisiana joined the increasing number of states considering legislation to require insurers to retroactively provide business interruption insurance for losses caused by the coronavirus, even if the policies would not otherwise provide this coverage. As we reported, New Jersey, New York, Massachusetts, and Ohio introduced similar bills in the past weeks as states grapple with the economic impact due to the spread of the coronavirus.
Like the other states’ bills, Louisiana Senate Bill 477 requires property insurance policies that include coverage for loss of use, loss of occupancy, or business interruption coverage “to include among the perils covered under the policy, coverage for business interruption” due to the coronavirus, up to the limits of the policy. The coverage is limited to the duration of Louisiana’s state of emergency and applies retroactively to March 11, 2020. However, unlike many of the bills introduced in other states in response to coronavirus, the Louisiana bill does not limit the required coverage to policies issued to businesses having over a certain number of employees, broadening the range of policies (and insurers) that will be implicated by the legislation.
Another unique feature of the Louisiana bill is that it would require all insurance policies covering business interruption issued on and after August 1, 2020 to include a notice of all policy exclusions, with the notice to be signed by the insured. The notice would be presumed to be part of the policy when issued and delivered, regardless of whether it is actually attached to the delivered policy. Importantly, a properly completed notice would create a rebuttable presumption that the insured knowingly contracted for coverage with the stated exclusions. Further, a signed notice would remain valid for the life of the policy and a new form would not be required for renewals, reinstatements, substitutes, or amended policies. This provision tracks Louisiana’s uninsured motorist coverage statute at La. Stat. Ann. § 22:1295, which also includes a rebuttable presumption created when an insured signs a form electing uninsured motorist coverage. As written, it is unclear whether the bill would require a new notice to be issued if a policy is amended to include a new exclusion, after a notice has already been signed.
Certainly, the proposed notice requirement places a heavy burden on insurers to identify exclusions already contained in the policy, and presumably, if passed, policyholders will attempt to argue that insurers may not rely on exclusions set forth in the policy, if the exclusions are not also listed in the notice. This also may create more claims against insurance agents and brokers that assist with the creation and transmission of the notices, to the extent they fail to list exclusions contained in the policy and the omissions preclude reliance on the exclusions.
Louisiana Senate Bill 495 proposes a business compensation fund, which purports to create a framework to expedite certain property insurance claims, dispute resolution, and coverage for coronavirus-related losses. The bill affords any insurer writing insurance in Louisiana the option to participate in a business compensation fund by depositing the greater of $50 million or 80 percent of the aggregate policy limits for “all commercial insurance policies” that the insurer has in force in Louisiana on March 11, 2020 or anytime thereafter during the state of emergency. In exchange for participation in the fund, insurers would be immune from claims of bad faith by claimants seeking compensation for losses associated with the COVID-19 pandemic. The bill purports to allow a claimant to seek compensation from the fund if they meet certain criteria, including being insured for commercial loss, the insured sustained loss of commercial income or revenue due to coronavirus, the insured agrees to accept 80 percent of actual losses up to the policy limits, and the application for a claim is received by the commissioner of insurance no more than 90 days after the expiration of the emergency declaration. It further allows insurers to challenge fraudulent claims or challenge the amount claimed by an insured.
Additionally, SB 506 would require property insurance policies to cover the cost of disinfecting and fumigation of buildings in which a person who tested positive for COVID-19 works or resides, and HB 856 limits liability for restaurants and other businesses that provide food or medical supplies during the state of emergency.
These Louisiana bills are indicative of states approaching certain COVID-19 insurance issues in a uniform matter, while also taking unique approaches to these issues based on individual state needs. Given the increasing variation in state COVID-19 insurance legislation, the need to track and become familiar with legislation and its progress is vital.
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