NCOIL To Develop Business Liability Protection Model Law

By John Hilton

The National Council of Insurance Legislators will discuss a Business Liability Protection Model Act during its upcoming annual meeting in Tampa, Fla. from Dec. 9-12 to give business a chance to reopen during the COVID-19 pandemic.

The legal exposure is not going away anytime soon, said Kentucky Rep. Bart Rowland, chair of the NCOIL Property & Casualty Insurance Committee, who is sponsoring the model law.

"Unfortunately, the country will be living with this virus for quite some time," he said in a news release. "However, conscientious businesses still must be able to function in this era of our ‘new normal’ without the cloud of potential litigation hanging over their heads. Of course, if a business acts in a reckless or willful manner, liability can attach, but the businesses who want to re-open in a safe manner should be provided a certain level of immunity from COVID-related lawsuits.”

'Cannot Function'

The model law will be co-sponsored by Indiana Rep. Matt Lehman, NCOIL president. Once completed, the act will be sent to state legislatures for adoption.

Various states, including Idaho, Iowa, Michigan, North Carolina, Oklahoma, Utah, Wyoming, Louisiana and Kansas have already adopted state legislation providing businesses with some type of limited civil liability immunity from defendants who are seeking damages related to contraction of COVID-19 at the premises in question.

“The economy simply cannot function if businesses can’t get back to the everyday service of providing a product or service to consumers," Lehman said. "Having a law in place that would provide a certain level of immunity to responsible businesses will encourage them to re-open, and protect them and their insurers from any unnecessary litigation.”

Business Interruption Update

Meanwhile, early court decisions are favoring insurers sued for business interruption coverage denials, the law firm Hinshaw & Culbertson reported Wednesday.

"By our count, insurers have prevailed on motions to dismiss in 26 cases, policyholders have avoided early dismissal in seven cases, and, in three Ohio state court cases, insurer motions to dismiss have been converted to motions for summary judgment to allow for discovery," the law firm wrote in an update.

Various factors are impacting the court rulings on business interruption claims, Hinshaw & Culbertson attorneys said, particularly the terms of the policy at issue—including the presence of virus and other exclusions—and the strategy employed by the policyholder in drafting its complaint.

"For example, in an apparent tactic to avoid application of virus exclusions, some insureds have specifically alleged that there is no evidence of COVID-19 on the insured property," the law firm explained. "Other policyholders have asserted the presence of the virus on the property in an attempt to plead direct physical loss."

The vast majority of COVID-19 coverage cases will not be subject to multi-district litigation (MDL). On August 14, the Judicial Panel on Multidistrict Litigation denied a request by some policyholders to consolidate all COVID-19 federal litigation.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.