Insurance regulators across the country have enacted emergency regulations, issued administrative guidance, and requested carriers to take certain actions to try to address the financial impact of the coronavirus (COVID-19) pandemic on individuals and businesses. Requirements imposed on or requested of health insurers to expand access to telehealth and eliminate or limit prior authorization or concurrent review have been widely reported, but there have been numerous other industry-wide actions. And, some state legislators have introduced bills to expand the scope of coverage to ameliorate the impact of the pandemic on insureds.
Explicit Limits on Cancellation or Non-Renewal of Policies
A number of states have prohibited insurers from terminating or non-renewing all types of insurance policies during the COVID-19 states of emergency declarations. For instance, The Alaska Division of Insurance issued Bulletin B-20-08 “prohibit[ing] carriers from terminating insurance contracts due to non-payment” through June 1, 2020. Similarly, Georgia’s Commissioner of Insurance “direct[ed]” all property/casualty insurers to “refrain from canceling, for the cause of non-payment any commercial policies that include business interruption or business income insurance,” for 60 days from March 20, 2020, and health insurers from canceling health policies for non-payment of premium until further notice in their directive.
In Washington, DC, health carriers were instructed in an emergency Commissioner’s Order that they “shall not cancel or non-renew any health benefit plan without express consent of the Commissioner.” Finally, New York’s governor issued an executive order imposing, among other things, a 60-day moratorium on the cancellation, non-renewal, or conditional renewal of policies, including workers’ compensation policies. New York’s Superintendent of Financial Services promulgated two sets of emergency regulations, dated March 29, 2020 and April 7, 2020, implementing that executive order.
Many other states have also issued bulletins, directives, or similar statements directing or prohibiting cancellation for non-payment of premium under a wide range of policies. States in this category include Arkansas, Colorado, Connecticut, Delaware, Louisiana, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Washington, and West Virginia.
Regulatory Guidance
Many other states’ regulators have used their “bully pulpit” to provide relief for policyholders. In those states the regulators have issued statements “requesting,” “advising,” “urging,” “recommending,” and other similar words, that carriers help their policyholders. In such states the regulators have suggested providing grace periods for the payment of premium and providing the greatest degree of flexibility in helping insureds stay covered. For example, Tennessee’s commissioner published a bulletin on March 24 requesting that insurers “work with employers or individuals to find the best ways to address concerns with the timing of premium payments in order to delay any cancellation of coverage for non-payment and collection activity.” Similarly, Florida issued an informational memorandum that asked all insurers “to be flexible with premium payments in order to avoid a lapse in coverage.” Other states in this category include Alabama, Hawaii, Illinois, Idaho, Indiana, Iowa, Maine, Maryland, Massachusetts, Montana, Nebraska, New Mexico, North Dakota, Pennsylvania, Rhode Island, Texas, Utah, Vermont, and Wisconsin.
Premium Calculations
A small number of states have taken steps relating to policies that contain mechanisms for premium calculations at a specified time – most commonly workers’ compensation policies. In those states the audits that would customarily be performed at the end of a policy period may occur now in order to address the impact of layoffs and terminations of employees due to the state of emergency orders. In Louisiana, Emergency Rule 39, promulgated as of March 26, 2020, provides that “[a]ny insured who has an auditable insurance policy issued by an admitted insurer shall have the right to make a demand upon its admitted insurer to permit the insured to immediately conduct a mid-term self-audit of the insurance policy.” Similarly, Ohio’s superintendent published bulletin 2020-03, which states that “[i]nsurers are prohibited from increasing premium rates based on a group’s decreased enrollment or participation due to COVID-19.” Other states adopting similar or related positions are Alaska, Maine, Mississippi, Texas, Utah, Vermont, and West Virginia.
California’s Premium Returns
On April 13, the California commissioner published Bulletin 2020-03 requiring premium reductions and ordering insurers to “make an initial premium refund for the months of March and April” for impacted policyholders. The order was directed at multiple lines of property/casualty insurance and may not be limited to just those two months.
Extending Coverage for Personal Delivery Drivers
Finally, in recognition of the vital role that delivery people are playing in the response to this crisis, a number of states, including Alabama, Connecticut, Florida, North Dakota, Washington, and Wisconsin have encouraged insurers to allow personal auto coverage to cover losses incurred when performing delivery service or otherwise offer such an endorsement to policies.
Legislators in a few states have proposed bills to expand the scope of business interruption insurance coverage. Ohio House Bill 589 proposes to construe any existing business interruption insurance policy to “include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic during the state of emergency.” The bill, if enacted, would apply to insureds with fewer than 100 employees and would create a “Business Interruption Fund” funded by assessments on Ohio insurers to be used to reimburse those insurers that made claim payments as a result of the change in law. Similar bills were introduced in Louisiana, Massachusetts, New Jersey, New York, and Pennsylvania.
New York enacted a law on March 18, 2020, to increase the availability of unpaid sick leave to New Yorkers. In that law and for the purposes of the expansion of sick leave, the definition of “disability” for purposes of the Workers’ Compensation Law was amended to include disabilities resulting from “a mandatory or precautionary order of quarantine or isolation issued by. . .any government entity duly authorized to issue such order due to COVID-19.”
Notwithstanding the degree to which commissioners believe themselves able to alter the terms of an in-force policy, they almost uniformly believe that insurers must make allowances under the current circumstances. For that reason, insurers will have to ensure not only that their consumer-facing staff are prepared to work with customers but that many automated back office functions are up to the task. Finally, statehouses around the country will have to be carefully watched for the potential that business interruption insurance policies will be required to provide coverage.
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. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Hartford
Harold Horwich
Benjamin Cordiano
Jeffrey MacDonald
Philadelphia
David Harbaugh