Businesses in New York Benefit from Enhanced Business Interruption Insurance
New York businesses now have access to business interruption insurance policies that broaden coverage, according to AM Best. A key change is that these policies no longer necessarily require physical damage for businesses to file claims. This shift comes from a new state law enacted in September 2024. The law allows for stand-alone policies that cover closures arising from specified events, expanding beyond the scope of traditional business interruption policies.
Traditional business interruption policies typically have required “direct physical loss” resulting from events such as fires before coverage could be triggered. This requirement was a central factor in numerous court decisions denying COVID-19-related business interruption claims in New York and other locations.
The new law opens the door for businesses to file claims under a wider range of circumstances. Coverage is available if a business is forced to close due to damage at its own location or at a neighboring property. Additionally, the law allows claims for closures that arise from an act or threatened act of violence, especially when the perpetrator is on the premises. Closures mandated via government orders also qualify for coverage under the terms of the new legislation.
The legislation also stipulates how these stand-alone policies can be provided. In cases where authorized insurers do not provide the coverage, the law allows them to be offered by excess lines carriers. Interested in mitigating risks like active shooter incidents which were previously difficult to address through conventional business interruption insurance schemes, excess lines insurers have expressed enthusiasm about underwriting such policies. Another aspect the law aims to address is business closures resulting from damage at nearby properties, which have often presented challenges under existing policies. Often, endorsements for civil authority orders exclude claims where the affected property isn’t owned by the insured.
AM Best’s attempts to obtain comments from industry trade groups, as well as the New York Department of Financial Services, a supporter of the legislation, were unsuccessful.
