Knowledge Bank

Introduction As the COVID-19 pandemic spread in the United States in 2020, state and local governments required many businesses to shut down. Many affected businesses consequently filed claims with their commercial insurance policies to recover lost revenue. However, insurance companies had planned well for such situations and denied coverage on most claims. When pursued in court these claims continued to be denied. This research proposes an alternative legislative solution to manage future catastrophic business losses incurred during government mandated shutdowns during public states of emergency. Methods Court decisions upholding insurance company denial of coverage for business lost income due to COVID-19 were examined, using traditional legal analysis, to discern the judicial rationale for denying coverage. In addition, public policy initiatives in the form of recently enacted state and federal laws, proposed legislation, and academic proposals issued during the pandemic period were examined, using post hoc public policy analysis methods. Results The legislation review showed that government, in general, did not have policies in place to protect businesses from government mandated shutdowns. The few reviewed legislative proposals enacted into law showed an intention to protect businesses. State legislative proposals generally favored mandating revisions to commercial insurance coverages, while proposals for federal law reform favored financial assistance to insurers.

Conclusion This research proposes new legislation in Ohio that applies to all licensed commercial insurers conducting business in the state. Under the proposed statute, once a public state of emergency is declared, the state insurance commissioner reviews claims from businesses forced to shut down that would otherwise be denied under the terms of the claimant's commercial insurance policy; and, if a claim meets criteria set forth in the proposed statute, the state pays the claim. Utilizing financing methods from both private insurers and the state government, once a level of specified aggregate losses due to the state of emergency is met, both the government and commercial insurers share jointly in the payment of claims on a pro-rata basis.