Insurers' COVID-19 Notepad: What You Need to Know Now (Week of March 23)

Trade Groups Decline Congressional Invitation for Insurers to Pay Uncovered COVID-19 Claims

On March 18, 2020, the American Property Casualty Insurance Association, National Association of Mutual Insurance Companies,  and other groups, addressing Congressional inquiries about the ability of the insurance industry to compensate businesses for economic losses stemming from the COVID-19 global health emergency, noted that “[b]usiness interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19.” The trade groups’ letter came in response to a bi-partisan request that insurers make financial losses related to COVID-19 “part of their commercial business interruption coverage for policyholders.”

Wisconsin Insurance Commissioner Urges Flexibility for Insureds Impacted by COVID-19

The Wisconsin Commissioner of Insurance (OCI) provided guidance to insurers regarding compliance with regulatory requirements during the COVID-19 public health emergency. Insurers are encouraged to offer flexibility to insureds who are incurring economic hardship, including offering non-cancellation periods, deferring premium payments, instituting premium holidays,  and accelerating or waiving underwriting requirements. Further, during the pendency of the public health emergency related to COVID-19, no insurer form filings are deemed approved by the OCI without express action by the Commissioner’s office.

AM Best to Stress-Test Rated Insurers

On March 18, 2020, AM Best announced that it will "stress-test" its rated insurance companies’ balance sheets to determine the impact of COVID-19 on their capital, investment portfolios, and reserve adequacy.

California Insurance Commissioner Notice: Minimum 60-day Premium Grace Period

On March 18, 2020, the California Insurance Commissioner issued a notice requesting that all insurance companies give their policyholders at least a 60-day grace period to pay insurance premiums in light of the disruption caused by COVID-19 and related response measures.

The state's notice was addressed to all admitted and non-admitted insurance companies that provide any insurance coverage in California including, life, health, auto, property, casualty, and other types of insurance. The notice states that was issued to “ensure policies are not canceled for nonpayment of premium due to the novel coronavirus (COVID-19) public health emergency.”  The notice also urged steps to eliminate the need for in-person payments, including that “all insurance agents, brokers, and other licensees who accept premium payments on behalf of insurers take steps to ensure that customers have the ability to make prompt insurance payments,” such as through online payments.

NY DFS Directive Requires Special COVID-19 Related Explanation of Benefits

The NY DFS, in a letter dated March 10, 2020, instructed that all property and casualty insurers to advise the DFS of all business interruption coverage, civil authority coverage, contingent business interruption coverage and supply chain coverage written in New York and in effect as of March 10, 2020. The directive requires insurers to prepare a special report under Section 308 of the New York Insurance Law that includes a “clear and concise explanation of benefits.” The report must be sent to the DFS and all commercial policyholders. Detailed instructions are included in the letter.

New Jersey Tables Mandatory Business Interruption Legislation

In response to the potential economic losses related to COVID-19, the New Jersey legislature had been considering a proposed bill, New Jersey Bill A-3844, that, if enacted, would have mandated insurers to provide business interruption coverage, regardless of the presence of any “virus” related exclusionary language. The bill, which proposed spreading the financial burden of mandated coverage via a new special purpose apportionment, has been tabled in light of concerns about its constitutionality.

Louisiana Restaurant Seeks Business Interruption Coverage Under “All Risk Policy”

A Louisiana restaurant commenced a declaratory judgment action seeking coverage under an “all risk policy” issued by Lloyd’s for losses arising out of state and city directives pertaining to the mitigation of COVID-19 infections. Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd’s London, et al., case no. 02558/2020 (La.Dist.Ct., Orleans Parish, March 16, 2020). The suit seeks to recover under “coverage in the event of the business closure by order of Civil Authority.” Complaint at ¶ 12. The policyholder contends the physical loss requirement is met by the presence of the virus on surfaces in the restaurant, and that the policy does not contain a virus exclusion. See id. at ¶¶ 14-15.

COVID-19 Shareholder Litigation & Management Liability

In Douglas v. Norwegian Cruise Lines, et al, no. 20-cv-21107 (S.D.Fl., March 12, 2020), an investor alleges the company inflated its stock price through misleading statements to investors that minimized the risk of COVID-19. The suit alleges that the cruise line made false and misleading statements or failed to disclose that: “(1) the Company was employing sales tactics of providing customers with unproven and/or blatantly false statements about COVID-19 to entice customers to purchase cruises, thus endangering the lives of both their customers and crew members; and (2) as a result, Defendants’ statements regarding the Company’s business and operations were materially false and misleading and/or lacked a reasonable basis at all relevant times.”

Another shareholder suit, McDermid v. Inovio Pharmaceuticals, Inc., et al, no. 20-cv-01402 (E.D.Pa., March 12, 2020), alleges false and misleading statements by Invovio’s CEO regarding the development and implementation of a COVID-19 vaccine. The suit alleges that false statements prompted the pharmaceutical company’s share price to surge, but when Inovio began to qualify and “walk back” those statements, the company's share price dropped significantly.