Business Interruption Insurance and COVID-19
An emergency bill relating to business interruption insurance was proposed to the Massachusetts House and Senate on March 24, 2020. It would require insurance policies with business interruption coverage to cover losses due to COVID-19 and would preclude an insurer from denying a claim even if the policy coverage excludes losses resulting from viruses, and even if there is no physical damage to the property. The legislation would apply to insureds with 150 or fewer FTE employees.
We understand that the insurance claims would be paid by assessments from insurance companies and the government would reimburse the insurance companies for paying the claims.
NY, NJ, and Ohio all have similar bills making their way through the state legislatures. Since this is an emergency bill, the hope is that the process to get the bill enacted will be expedited.
There are a lot of details that would need to be worked out, obviously. It’s very difficult to predict any time frame, or what the legislation will look like when/if approved.
We recommend you identify any applicable business interruption coverage in your insurance policies, carefully review the terms of such policies, and then provide your insurers with timely notification of any potentially covered losses. If you haven’t already filed claims with your insurers, then you should, even if the present coverage requires physical loss for business interruption or virus is excluded, and even if the claim is denied. When you file these pre-emptive claims, you should include documentation substantiating your losses, if you can. This way, if/when the legislation is enacted, you’ll be in the queue to have the claims paid. If the government is going to be reimbursing the insurers for these claims, then the thought is that there will be a limit on the amount of funds available, similar to the PPP loans.
Also, you can check in with your broker to see if you can renegotiate terms. For example, can you recalculate your premiums based on your reduced payroll? You’d need to be careful with this, so that you reevaluate this post pandemic, and make sure you have sufficient coverage when you rehire.
We are monitoring the bill for any developments.
Moratorium on Evictions for Small Business Tenants impacted by COVID-19
Emergency legislation regarding an eviction ban on small business tenants was signed into law on Monday by Governor Baker.
The ban relates to evictions but doesn’t affect a tenant’s obligations to pay rent. A landlord can’t impose a late fee if the nonpayment of rent is COVID-19 related. The moratorium expires on the earlier of 120 days after the effective date of the legislation, or 45 days after the COVID-19 Emergency has been lifted, whichever is sooner. Governor Baker can extend the moratorium in increments of not more than 90 days so long as the expiration is no later than 45 days after the COVID-19 Emergency is lifted.
While you may not have an immediate need to take advantage of the ban, we wanted you to be aware of it, as it may give you some relief in the future and also may provide a basis for leverage in negotiations with your landlord.
And Last But Not Least
We hope you, your families and your employees are staying safe and healthy in this very challenging climate. In being resilient, it is important to remember to take care of yourselves, so you are equipped to take care of your businesses, those you serve in your businesses and your employees. These days, we often hear the words “We’re in this together”. Everyone is being affected by the pandemic, and our experience so far is that the lenders, landlords, vendors, and other members of your business circle are generally willing to be flexible and helpful if they can, so you shouldn’t hesitate to ask for help. This is an unprecedented time for businesses, everyone is affected, no one is at fault, and we will need to be open to creative solutions which will involve give and take on all sides.
To the extent you need help with negotiating and planning the next few weeks, months, or quarters, please don’t hesitate to reach out to your Archstone attorney.