Relates to business interruption insurance

BILL NUMBER:S5580

Title of bill

An act to amend the insurance law, in relation to business interruption insurance

Summary of provisions

This bill would prohibit an insurance company that provides business interruption insurance from denying or excluding coverage for a claim for loss or damage that is caused by a peril insured against solely because the insured peril resulted from a peril that is not insured against or is excluded under the policy, resulted from an action that was intended to mitigate loss from a peril that is not insured against or is excluded under the policy, or occurred within a reasonable amount of time either before or after a peril that is not insured against or is excluded under the policy.

Justification

When Superstorm Sandy struck, one of the effects was a massive power outage in New York City. In the aftermath of Sandy, many business owners submitted claims under their business interruption insurance for losses caused by the outage and were surprised when the insurance company denied the claims on the grounds that their policies excluded coverage for loss or damage caused by a flood. When many of these business owners pointed out that their premises were not actually flooded and that their policies include coverage for losses caused by a power outage, the insurance companies argued that they could deny coverage because the power outage was caused by a flood. This bill would rectify this inequity by prohibiting insurers from denying business interruption claims for losses that are covered under the policy because those losses were caused by something that is excluded from coverage. This will ensure that business owners are able to receive the coverage that they paid for when they purchased their policy, thereby allowing them to recover their losses and reopen for business in a timely manner.

Legislative history

New bill.

Fiscal implications

None noted.

Effective date

Immediately.