Of the various complications that have arisen as a consequence of the COVID-19 pandemic, perhaps the most predictable has been the difficulty that so many companies and individual consumers have faced in paying their insurance premiums. To address the issue, regulators in states like New Jersey have required that carriers provide premium rebates or refunds to adversely-impacted policyholders in an effort to account for reductions in exposures caused by state shelter-in-place orders. These efforts have focused on private passenger automobile insurance, commercial automobile, workers compensation, commercial multiple-peril, commercial liability, medical malpractice, and any other lines of insurance coverage where the measures of risk have become substantially overstated as a result of the COVID-19 pandemic.
Regulators in other states like New Hampshire have issued bulletins acknowledging premium changes that had already been provided by automobile insurers in response to hardships suffered in relation to COVID-19. These bulletins have also affirmed that such voluntary measures by carriers would not be considered rebates or unfairly discriminatory practices.
Workers compensation carriers have been especially affected by the pandemic. Non-essential businesses that have been unable to operate as a result of shelter-in-place orders have significantly reduced, if not eliminated, workers compensation risk which has led to a direct reduction in demand for workers compensation insurance coverage. States like Nevada have issued regulatory directives requesting workers compensation carriers to consider reductions in exposure in an effort to provide premium relief to businesses. Carriers have been further encouraged to consider the impact of the overall reduction in workers’ compensation exposure on the carriers’ rates and business operations.
Looking at an issue that cuts across multiple lines, some states have focused on issues involving cancellation and non-renewal as a result of non-payment of premiums. For example, the Mississippi Department of Insurance issued a bulletin providing a 60-day moratorium on the cancellation and non-renewal of policies for the non-payment of premiums. Mississippi then issued a second bulletin clarifying that insurers could issue notices of cancellation and non-renewal for non-payment of premiums during the moratorium period; however, if a notice of cancellation or non-renewal was issued during the moratorium period, any notice periods required by statute or the policy could begin to run. The bulletin further clarified that in no event could a cancellation or non-renewal for non-payment be effective until after the 60-day moratorium period expired.
Similar to Mississippi, Ohio’s Superintendent of Insurance issued an order directing Ohio insurers to provide their insureds with at least a 60-day grace period to pay insurance premiums to ensure that insurance policies would not be cancelled for nonpayment of premium during the state of emergency ordered issued by Ohio’s governor. However, insurers were not required to waive any premiums.
Other states have looked beyond the direct effects of the pandemic on consumers. Indeed, the impacts on insurers have also been taken into account. The Maryland Department of Insurance issued a bulletin allowing insurers that provided premium grace periods to request a permitted accounting practice to waive the Statutory Accounting Principle that requires an insurer to non-admit premium receivable assets over 90 days past due. As a result, the number of days past due that would be allowed as an admitted asset would be based on an insurer’s grace period.
Millions of Americans have been affected by unexpected job loss or reductions in income caused by the pandemic. Efforts by regulators to ensure that businesses and individual insureds maintain critical insurance coverages have played a vital role in the country’s COVID-19 response efforts. While the ultimate effects of these initiatives will need to be studied, there is little doubt that a significant number of insurance consumers would have lost coverage had it not been for premium relief initiatives, which would have led to additional negative economic consequences.
Immunity From Certain Civil Liability for Businesses
Litigation risk is inherent in any business endeavor, at least to some extent, but the pandemic has added a new layer of litigation exposure for both businesses and their insurers. Businesses have been forced to carefully consider various reopening scenarios and risk mitigation techniques as they face the very real problem of having to stay afloat despite diminished demand and mandatory shutdown orders. This fluid and volatile scenario has made it difficult for carriers to adequately assess civil litigation risks and price commercial coverages.
As businesses have assessed the risks associated with reopening and operating under new and constantly evolving compliance standards associated with COVID-19, some states have responded by implementing measures aimed at shielding businesses from certain civil liability. These initiatives, which seek to protect organizations and encourage them to reopen, have worked hand-in-hand with relief efforts aimed at other segments of the economy and been integral in mitigating the harm that the pandemic has caused to the national economy.
Various states and the District of Columbia have adopted legislation providing businesses with civil liability immunity under limited circumstances where customers and employees contract COVID-19 at their premises.
There has been an early emphasis on providing immunity from liability to essential workers and providers of goods, and now there is increasing interest in providing immunity from liability for business seeking to reopen after mandatory shutdowns and shelter-in-place orders. Perhaps no industry in the United States economy has been as directly and severely impacted by the pandemic as the healthcare industry. Policymakers across the country have recognized the need to support this critical sector and attempted to provide tools and protections for those being called on to respond to this pandemic.
The District of Columbia (DC) enacted the Coronavirus Support Emergency Amendment Act of 2020 which has provided an exemption from liability for healthcare providers, donors of time, donors of professional services, donors of equipment, donors of supplies, and a contractor or subcontractor on a DC government contract in a civil action for damages resulting in the care of treatment of COVID-19. Similarly, the Kansas Legislature enacted legislation which has provided immunity from civil liability for healthcare providers and designers, manufacturers, labelers, sellers, distributers, providers, or people who donate qualified products in response to the COVID-19 pandemic. These and other initiatives aimed at supporting the healthcare industry have been important in ensuring the availability of important healthcare services across the country.
Louisiana passed legislation designed to protect restaurants that provided food-to-go during the COVID-19 pandemic. The bill protects owners, operators, employees, contractors, and agents of restaurants that are in “substantial compliance” with applicable COVID-19 procedures established by a federal, state, or local agency and states. It states that no such individual or business would face civil liability for injury or death due to COVID-19 infection transmitted through the preparation and serving of food and beverage products by the restaurant during the COVID-19 public health emergency. No immunity is provided if the injury or death due to COVID-19 was caused by gross negligence or willful and wanton misconduct.
Mississippi has taken one of the broadest approaches to addressing civil liability. The Mississippi Back-to-Business Liability Assurance Act provides that an essential business, or agent of that essential business, will not be held liable for civil damages for any injuries or death resulting from actual or alleged exposure or potential exposure to COVID-19 in the course of the performance of its “functions or services in the time before applicable public health guidance was available.”
These and other efforts to provide a blanket of protection for business and shield them from unreasonable civil liability due to COVID-19 will have measurable impact on the nation’s economic recovery generally and a significant impact on the insurance industry. This is especially true for carriers issuing comprehensive general liability coverages which cover bodily injury caused to third-parties on the insured business’ premises. By affording immunity to businesses for harm caused by COVID-19, it follows that there would be fewer claims made against those businesses under general liability insurance policies. Fewer claims should result in less exposure for carriers and, therefore, lower premiums, but that remains to be seen. Carriers and business owners are well advised to monitor these developments closely as they continue to navigate these uncharted waters.
The measures described here are only one piece of a much larger puzzle that will need to be solved for the United Sates economy to rebound from the pandemic. Congress will likely need to pass additional legislation to support businesses and individuals, and efforts are already underway to pass additional aid in the form of a stimulus bill that would address civil liability for businesses. States must continue to ensure that individuals and businesses do not lose important insurance coverages as a result of temporary setbacks so they may continue to operate and have a positive effect on the national economic recovery. These efforts will go hand-in-glove with initiatives from state and federal health officials to assure that businesses and people operate in a safe and appropriate manner.
While it will be interesting to study the effects of these measures on the country’s economic recovery years from now, the hope is that they are currently bringing relief to the increasingly growing number of people and organizations that have been affected by COVID-19. What is certain is that state regulators will likely have more work to do in the coming months.