New York recently passed a law that now allows insurance companies to offer more expansive business interruption coverage in New York. The change expands the definition of “business interruption insurance” to eliminate the prerequisite that there be a physical loss to tangible property or damage to the premises, while addressing broader risks that may disrupt normal operations, such as government mandates and other emergency situations. Prior to this change, business interruption policies issued in New York typically required an accompanying physical loss to tangible property; if there was no physical property damage, there was not coverage for associated business interruption costs. This proved to be an obstacle for insureds seeking coverage stemming from COVID-19 closures, which many insurers denied because of the absence of any physical loss to tangible property. Although insureds and insurers agreed that businesses suffered tremendous business interruption losses because of the pandemic, those losses and claims were frequently denied because the COVID-19 virus did not constitute “damage to tangible property.” This new law also amends New York Insurance Law §4101(a) to authorize the issuance of stand-alone business interruption insurance policies.
Business interruption insurance can help cover additional expenses and income lost during a shutdown, which can be substantial. We strongly encourage clients to regularly evaluate their insurance policies internally or through Harter Secrest & Emery LLP’s Insurance Coverage team. Please contact us if you have any questions or need assistance in navigating this process.