Early in the COVID-19 pandemic, the New York Legislature considered a bill which would have retroactively rewritten commercial insurance policies to provide coverage to businesses interrupted by the spread of COVID-19 and government attempts to curtail it. New York legislators sought to “hold harmless businesses who currently hold business interruption insurance, for losses as a result of the current COVID-19 health emergency, but for which no such coverage is currently offered.” The bills proposed to do so by forcing insurers to shoulder the burdens of the pandemic, whether their insurance policies provided the coverage in question or not. This retroactive interference with contracts prompted concerns from insurers that the bill undermined contractual relationships, raising constitutional concerns.

The constitutional concerns with such legislation were premised on the understanding that commercial insurance policies insuring New York business owners did not generally cover income lost due to COVID-19 and government orders intending to curtail the virus’s spread. While the bill was under consideration and since the New York legislature declined to adopt it, many business owners also brought cases seeking this coverage in federal and state courts. New York courts have overwhelmingly confirmed the initial understanding: no insurance coverage exists for money lost due to the presence of COVID-19 or the government orders. This emerging consensus of case law confirms that any legislation mandating insurance coverage for losses emerging from the COVID-19 pandemic would have retroactively and impermissibly interfered with contracts, in violation of the New York and United States Constitutions.

NY’s Proposed Business Income Legislation

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