New York has enacted a law permitting stand-alone business interruption insurance policies that provide coverage without requiring direct physical loss.
This legislation, effective September 27, 2024, allows businesses to claim losses from closures due to property damage, on-site violent acts or threats, and government-mandated shutdowns.
The law mandates coverage when a business shuts down due to damage to its own or a neighboring property, acts of violence or threats occurring on-site, or government orders.
Passed in June 2024 and enacted in September, the law allows excess lines carriers to offer these stand-alone policies if authorized insurers do not provide coverage.
The law, codified in New York Insurance Law § 1113(a)(35), defines business interruption insurance as coverage against loss of use, occupancy, rents, and profits resulting from closures due to:
- Loss of or damage to insured or neighboring property.
- An act or threatened act of violence while the perpetrator is on the business premises.
- A government order.
Traditional business interruption policies cover net profit losses linked to covered perils like fire, requiring direct physical loss or damage for claims. This clause has been key in courts rejecting COVID-19-related claims, including in New York.
The pandemic and shutdowns highlighted how businesses can be forced to close without physical damage. In cases where damage to a neighboring property leads to closure, standard policies do not apply. Endorsements for civil authority-ordered closures also exclude claims based on damage to nearby buildings.
The law also extends coverage to active shooter incidents that do not involve property damage. Excess line carriers are particularly interested in offering this coverage.
Industry trade groups and the New York Department of Financial Services, which requested the legislation, did not provide comments.
While the legislation broadens coverage, it requires a complete business closure to trigger claims, excluding losses from reduced operations. Businesses are advised to review policy terms carefully, as exclusions—such as those for communicable diseases or pollution—may limit coverage.
The insurance market’s response to this development remains to be seen, as insurers evaluate the risks and potential premiums associated with offering such coverage.
In a related effort to address insurance costs, a coalition led by Uber has launched a campaign advocating for reduced insurance premiums for taxi and ride-share drivers in New York City. The group supports legislation to lower the minimum liability coverage requirement from $200,000 to $50,000, aiming to alleviate the financial burden on drivers.
