Business interruption coverage generally requires that the interruption result from physical damage to property. Therefore, it will most likely not provide coverage for businesses impacted by the COVID-19 pandemic.
In an attempt to provide relief to small and medium size businesses (with fewer than 100 employees), Assemblyman Robert Carroll of Brooklyn, joined by 14 co-sponsors, introduced Assembly Bill 10229 on March 27, 2020. Under the proposed bill, effective March 7, 2020, “every policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption, shall be construed to include among the covered perils under that policy, coverage for business interruption during a period of a declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.” In other words, the proposed legislation would provide business interruption coverage for the present emergency notwithstanding the fact that it is not available under policies as written.
The proposed bill also authorizes the Superintendent of Financial Services to collect funds from companies doing business under the New York State Insurance Law in order to reimburse insurance companies that pay benefits under the act.
This proposed legislation was referred to the Assembly Committee on Insurance for hearings and possible amendments. If it is reported out of Committee, the bill would have to be passed by the New York State Assembly and the New York State Senate and signed by the Governor before it becomes law.
It is difficult to predict when or if the Committee, the full Assembly, or the Senate might act on this proposal. Should the bill pass, it is likely that insurance companies will challenge it in court. We will continue to monitor this and all other developments that might provide relief and assistance to our business clients.