S 1188 – Proposed legislation to mandate business interruption (BI) loss payments in South Carolina
Three SC state Senators have introduced legislation to retroactively alter the terms of commercial policies and require insurers to compensate certain policyholders for COVID-19 losses that are not covered. Similar bills have been proposed in Louisiana, Massachusetts, New Jersey, New York, Ohio and Pennsylvania.
The SC legislation:
- Would apply to businesses with 150 or less employees
- Would provide coverage for BI losses due to COVID-19 – even if the policy has a virus exclusion
- Would provide coverage regardless of physical damage to insured property
- Allows Department of Insurance to assess ALL insurance policies (personal and commercial) to recoup losses and reimburse insurance companies for BI claims paid
IIABSC has joined the SC Insurance Association and other insurer trade groups in opposing S 1188. Since most insurance policies do not provide coverage for losses related to bacteria and virus transmission, retroactively invalidating exclusions or mandating coverage would be unjust and require insurers to pay for policyholders’ business costs and lost profits for which no premium has been collected.
This legislation would retroactively rewrite contract provisions which appears to be a direct conflict with the U.S. Constitution’s non-impairment clause. As a rule, contracts should not be tampered with by subsequent laws that would change or modify the rights and obligations of the parties.
S 1188 proposes to “reimburse” commercial insurers by assessing all licensed insurers. An assessment upon all licensed insurers writing all lines of insurance would impose additional costs upon every insurer providing coverage, and ultimately each policyholder in South Carolina.
The legislature met on May 12 and will return in September. It is unclear how much business will get done. It will be difficult – but not impossible – to pass a newly introduced bill this late in the legislative session.
NCCI Rule Change for Furloughed Employees Approved in South Carolina
The South Carolina Department of Insurance has approved a rule change from NCCI that will create a new statistical code for the reporting of payroll for paid furloughed employees who are not working due to government orders issued in response to the COVID-19 outbreak.
This change will exclude such payroll from the calculation of premiums and have a retroactive effective date of March 1, 2020. The rule has an expiration date of December 31, 2020, which could be revised to an earlier or later time.
The rule was just recently adopted by the DOI so insurance companies may just be receiving the details.
Third Party Service Provider Bulletin
The DOI has issued Bulletin Number 2020-04 – the fourth in the series of bulletins regarding the implementation of the South Carolina Insurance Data Security Act (SCIDSA). This latest bulletin addresses the requirements that non-exempt licensees (agencies with 10 or more employees) have in the oversight of third-party service providers – which is effective in South Carolina July 1, 2020.
The oversight applies to third party service providers that have access to agency nonpublic personal information. This might include your agency management system provider and/or your IT provider – but not your building cleaning service or yard maintenance company. It does NOT include insurance carriers that you contract with as they are licensees under the law with different requirements and it does not include your policyholder customers.
Non-exempt licensees must exercise due diligence in selecting third-party service providers and ensuring selected third-party service providers implement appropriate administrative, technical and physical measures to protect and secure the information system and nonpublic information (NPI) that is accessible.
IIABSC is developing some suggested guidelines and resources for complying with this section of the SCIDSA. Look for more information coming soon.