Reed Smith Client Alerts

On March 10, 2020, the New York Department of Financial Services (DFS), recognizing that "in connection with the outbreak of the novel coronavirus (COVID-19), policyholders have urgent questions about the 'business interruption' coverages provided by their commercial property insurance policy," issued a Section 308 letter requiring all property and casualty insurers writing insurance in New York to provide "a clear and concise explanation of benefits" to their policyholders about the business interruption coverage provided by their policies. In doing so, DFS acknowledged "the potential impact of COVID-19 on business losses" and put insurers on notice that in these unprecedented times "DFS considers Insurers' obligations to policyholders a heightened priority."

Authors: Andrew B. Breidenbach David M. Halbreich

By March 18, 2020, commercial property insurers must prepare explanations of benefits to their policyholders regarding the commercial property insurance they have written in New York and addressing the following issues:

  • Identifying the commercial property insurance and/or related insurance policy that the insured holds.
  • Identifying whether the insured’s policy provides “business interruption” coverage and/or "contingent business interruption" coverage and, if so, identifying the "covered perils," describing the requirements for "physical damage or loss," and explaining whether contamination related to a pandemic may constitute “physical damage or loss.”
  • Identifying whether the policy provides "civil authority" coverage and, if so, describing the policy’s requirement for "physical damage or loss," if any, and explaining whether a civil authority prohibiting or impairing the policyholder's access to its covered property in connection with COVID-19 is sufficient for coverage under the policy.
  • Identifying whether the insured's policy provides "supply chain" coverage and, if so, stating whether such coverage is limited to named products or services from a named supplier or company, describing the policy’s requirement for "physical damage or loss," if any, and explaining whether contamination related to a pandemic may constitute "physical damage or loss."
  • Explaining the required waiting periods under the policy, if any.