Regulatory and Legislative Bodies Seek To Broaden Scope Of Business Interruption Insurance Coverage In Wake of COVID-19

Tarter Krinsky & Drogin LLP

The following regulatory and legislative developments have been announced in the wake of the novel Coronavirus (COVID-19). These developments appear to reflect the desire of legislative and regulatory bodies to make business interruption insurance policies, which are generally drawn narrowly, to be more broadly construed to cover the COVID-19 pandemic. These regulatory and legislative developments, like COVID-19, are fast-moving and subject to change.

The New York State Department of Financial Services has directed that all commercial property insurers shall provide to their insureds written explanations concerning business interruption coverage in connection with COVID-19. The carriers have been directed to send out the explanations to policyholders by March 18, 2020. Below is a summary of the written explanations the insurers are directed to provide:

  • A description of the type of commercial property insurance or related insurance held by the policyholder
  • Informing the policyholder whether the policy provides "business interruption" coverage and, if so, whether a pandemic may constitute a "physical damage or loss" so as to trigger coverage
  • Informing the policyholder whether the policy provides "civil authority" coverage and, if so, providing a description of the type of damage or loss that is sufficient under the policy, including a specific explanation of whether a civil authority prohibiting or impairing the policyholder's access to its covered property in connection with COVID-19 is sufficient for coverage (similar information must also be provided for any "contingent business interruption" or "supply chain" policy)
  • The waiting period under the policy and the length of coverage after a covered incident occurs

Separately, the New Jersey legislature has introduced a bill to eliminate the "virus" exclusion typical in business interruption policies. If passed, the bill would force insurers to provide coverage for business interruption coverage for COVID-19 losses even if the policy expressly excludes them from coverage. The bill applies to policyholders with less than 100 employees.

A copy of the New York Department of Financial Services directive can be accessed here. To read more about the proposed legislation in New Jersey, click here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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