On September 27, 2024, New York Governor Kathy Hochul signed Bill No. A10342 into law, authorizing the issuance of stand-alone business interruption insurance coverage. This bill was introduced and passed in response to the COVID-19 pandemic, which forced many businesses to close temporarily as a result of government shutdown orders.
Many affected businesses submitted insurance claims under business owners or property insurance policies, which included some form of business interruption coverage. The problem was that such coverage was conditioned upon “[direct] physical loss [of] or damage” to covered property. Because of the requisite property damage trigger, most businesses were denied business interruption coverage, often spurning litigation. Courts nationwide have held, almost uniformly, that economic losses due to government-ordered shutdowns, enacted to prevent the spread of the coronavirus, do not constitute “physical loss” or “physical damage” to covered property.
The new law makes business interruption insurance that is not conditioned upon physical loss or damage available for purchase in New York. Such coverage can be offered in both the traditional (admitted lines) market and the excess and surplus lines market (procured through excess lines brokers).
Under the new law, “business interruption insurance” is defined to include coverage for loss of use and occupancy, rents, and profits resulting from a business closure due to government orders (e.g., government shutdown orders). The definition also includes losses from business closures due to acts or threatened acts of violence while a perpetrator is on the business premises (e.g., an active shooter scenario). The definition also includes coverage for losses from a business closure caused by loss or damage to insured or neighboring property.
The law, which went into effect on October 27, 2024, and is codified at New York Insurance Law § 1113(a)(34), reads, in relevant part:
§ 1113. Kinds of insurance authorized. (a) The kinds of insurance which may be authorized in this state, subject to other provisions of this chapter, and their scope, are set forth in the following paragraphs.***
***
(34) “Business interruption insurance” means insurance against loss of use and occupancy, rents, and profits resulting from a business closure due to: (A) loss of or damage to insured or neighboring property; (B) an act or threatened act of violence while the perpetrator is on the business premises; or (C) a government order.
Additionally, the new statute amends New York Insurance Law § 4101(a) to make business interruption insurance a “basic kind of insurance.” Further details of the law can be viewed here.
This new law can prove extremely helpful to business owners, as property damage is no longer a prerequisite to business interruption coverage. As the pandemic has shown, business losses often occur for reasons unrelated to physical loss or damage to covered property, and without insurance, the financial impact can be devastating. Nonetheless, it is uncertain whether many insurers will be willing to offer such coverage and for what price.
Should you have any questions on how the new law may impact your company, please contact Janeen Thomas at JThomas@sdvlaw.com or David Jordan at DJordan@sdvlaw.com.