Nancy D. Adams is the Co-Chair of the Insurance Practice at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. Kaitlyn C. Leonard is an Associate with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. in its Boston office.

As the world grapples with the effects of the COVID-19 pandemic, both in terms of the public health and safety implications and in terms of the profound impact that the pandemic is having—and will continue to have—on the national and global economies, some state legislators have attempted to find a source of relief for small businesses. However, in adopting such laws, legislatures may cause more harm than good, particularly for the very businesses that they are seeking to assist.

As of April 17, legislators in seven states1 have proposed bills meant to provide policyholders of business interruption insurance policies with coverage for all losses sustained in connection with the outbreak of COVID-19, even though most of those policies do not provide—and, in some instances, exclude—coverage for such losses.

In general, when insurers enter a line of business, they analyze the potential risk being insured and determine the premium amount based on that risk analysis. Policyholders then pay a premium to insurers in return for the insurer’s promise to pay specified damage or loss. Like any other contract, each party bargains for the terms and the price of the insurance policy. Then, if a policyholder suffers a loss covered by the policy, she may make a claim with her insurer.