Following in the footsteps of several state legislatures, the Council of the District of Columbia plans to consider on May 5 draft legislation that would require insurers to provide coverage for business interruption losses resulting directly or indirectly from the coronavirus (COVID-19) public health emergency.
Council of the District of Columbia Chairman Phil Mendelson sent a memorandum to Council Secretary Nyasha Smith on April 30 requesting, among other measures, that (1) the Coronavirus Omnibus Emergency Declaration Resolution of 2020, (2) the Coronavirus Omnibus Emergency Amendment Act of 2020, and (3) the Coronavirus Omnibus Temporary Amendment Act of 2020 be placed on the legislative meeting agenda for May 5, 2020.
In the memorandum, Chairman Mendelson stated, “The legislation includes new requirements for business interruption insurance to pay for certain business closures during the pandemic.” The memorandum had the draft measures attached and further noted that “[i]t is a rough draft and includes almost all of the provisions requested by Councilmembers and the Executive.”
The chairman noted, “This will be a consensus bill.”
DC Coronavirus Omnibus Emergency Declaration Resolution of 2020
The draft Coronavirus Omnibus Emergency Declaration Resolution of 2020 provides a list of circumstances that constitute “emergency circumstances,” making it necessary that the Coronavirus Omnibus Emergency Amendment Act of 2020 be adopted “after a single reading.”
It states, in part:
As a result of the Mayor’s order, many businesses have been required to close in the District. Many of the business interruption insurance policies will only cover an insured in the case that the business is shut down due to physical damage and do not explicitly provide coverage for damages resulting from a public health emergency. It is necessary to ensure that many businesses that are experiencing financial distress resulting from the order can put in a claim against an existing business interruption insurance policy.
DC Coronavirus Omnibus Emergency Amendment Act of 2020
Section 2 of the draft Coronavirus Omnibus Emergency Amendment Act of 2020 discusses business interruption insurance, and provides, in pertinent part:
Notwithstanding any provision of District law and notwithstanding the terms of any policy of insurance subject to this section (including any endorsement thereto or exclusions to coverage included therewith), every policy of insurance in force in the District that insures against loss of or damage to property and that includes, as of the effective date of this act, coverage for loss of use and occupancy and business interruption, shall be construed to provide coverage for business interruption directly or indirectly resulting from a public health emergency declared pursuant to section 5a of the District of Columbia Public Emergency Act of 1980, 183 30 effective October 17, 2002 (D.C. Law 14-194; D.C. Official Code § 7-2304.01).
The draft further provides that “[n]o insurer may deny a claim for loss of use and occupancy and business interruption due to: (A) Losses arising from actions an insured takes in response to [a mayor’s order issued during a public health emergency], even if the relevant insurance policy excludes losses resulting from viruses; or (B) There being no physical damage to the property of the insured or to any other relevant property.” (Emphasis added.)
In addition, “[t]he coverage required by this section shall indemnify the insured, subject to the limits under the policy, for any loss of business or business interruption for the duration of a public health emergency declared pursuant to section 5a of the District of Columbia Public Emergency Act of 1980.” (Emphasis added.)
Similar to other states’ proposed legislation,[1] the draft legislation provides that “[t]his section shall apply only to policies issued to insureds with fewer than 100 full-time employees, each of whom work 25 or more hours per week as of March 1, 2020.”
Moreover, the draft legislation provides a procedure for insurers to apply to the commissioner of the District of Columbia Department of Insurance, Securities, and Banking for relief and reimbursement from funds if they indemnify policyholders who file claims subject to this section.
Importance of Liberalization and ‘Conformity to Statute’ Policy Provisions
As discussed in our recent LawFlash, COVID-19 Business Interruption Losses: The Potential Keys to Unlocking Insurance Recovery, if this or similar legislation is passed, policyholders can point to liberalization and “conformity to statute” conditions in their policies to support their claims for coverage, at least with respect to insured locations under the policy located within the jurisdiction(s) where such legislation is passed.
Coronavirus COVID-19 Task Force
For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold.
