As states consider ways to assist local businesses with managing the fallout from the COVID-19 global pandemic, one solution has been the adoption of legislation requiring property insurers to cover COVID-19 related business interruption claims that are otherwise excluded by the policy’s language. Such legislation, while presumably popular at the state capital given the insurance industries’ ability to cope with heavy regulation, is not without constitutional limitation. This article discusses recent developments in the business interruption insurance landscape, the general constitutional analysis of contract impairment claims, and provides some guidance as to how courts may handle these challenges.
Business Interruption Coverage Denials
Businesses forced to shut-down to mitigate the spread of COVID-19 are turning to their business interruption policies to recover losses. These claims are routinely denied given that the policy requires some sort of physical loss or damage before coverage will trigger.