New Law Expands Business Interruption Insurance Coverage and Accessibility

On May 17, 2024, the New York State Assembly passed Bill A10342, amending the state’s insurance law to authorize standalone business interruption insurance. On Sept. 27, 2024, Governor Kathy Hochul approved A.B. 10342.

This significant legislative change enhances the availability and scope of coverage for New York businesses, providing additional protection against unforeseen closures.

Key Provisions of the New Law

1. Expanded Definition of Business Interruption Insurance
   • The law defines business interruption insurance to include coverage for losses arising from:
     • Property damage affecting insured or neighboring property.
     • Acts or threats of violence occurring on the business premises.
     • Government orders mandating closure.
2. Standalone Policies Now Available
   • Previously, business interruption insurance was typically bundled with property insurance. Under the new law, businesses can now purchase standalone policies tailored specifically to their needs.
3. Access to Excess Line Insurers
   • Licensed excess line brokers can now procure business interruption insurance from insurers not authorized to transact business in New York. This change broadens the market and increases options for businesses struggling to find coverage from in-state insurers.
4. New Financial Requirements for Insurers
   • The law imposes minimum capital and surplus requirements for insurers offering standalone business interruption coverage, ensuring they have sufficient financial reserves to cover claims.

Implications for New York Businesses

• Greater Access to Coverage: Businesses now have the flexibility to obtain business interruption insurance as a separate policy, allowing for more customized protection.
• Enhanced Protection: The explicit inclusion of government-mandated closures and threats of violence as covered events resolves prior ambiguities that led to coverage disputes.
• Potential Cost Adjustments: Insurers may increase premiums due to new financial requirements, and businesses should carefully evaluate coverage terms before purchasing policies.
• Increased Availability: Businesses unable to secure coverage from traditional insurers may now obtain it from excess line insurers through licensed brokers.

Next Steps for Businesses

We recommend that New York businesses:

• Review existing business interruption coverage to determine if standalone coverage provides additional benefits.
• Consult with their insurance broker to explore policy options from both admitted and excess line insurers.
• Assess risk exposure to ensure adequate protection against potential interruptions due to property damage, violence, or government-mandated closures.

If you would like more information regarding this topic please contact Thomas S. Tripodianos at ttripodianos@wbgllp.com or call (914) 607-6440