Insurance Law Alert

Through the promulgation of emergency regulations, New York’s Department of Financial Services (DFS) on Monday directed property and casualty insurers to provide a 60-day grace period to small businesses and consumers financially affected by COVID-19.  In the same regulation, it ordered life insurers regulated by the state to allow consumers to defer paying premiums for 90 days. This follows Governor Andrew M. Cuomo’s Executive Order No. 202.13.  It could offer relief for small businesses, which have been slammed by other parts of the insurance industry amid the COVID-19 crisis. Many who held business-interruption insurance discovered in recent weeks that their plan would not cover the coronavirus pandemic.  The promulgation requires insurers to allow deferred payments to be paid back in the year following the grace period and not to report any late payments to credit-rating agencies. It also calls on premium finance agencies to offer the same grace periods to businesses and consumers who financed payments on their premiums. In addition, DFS announced that uninsured New Yorkers can obtain health insurance through New York State’s Health Plan Marketplace under a special enrollment period from April 1st - April 15th.

Despite the fact that these regulations could place New York State squarely at odds with certain sectors of its regulated insurance industry, the DFS announced that :

The 134 members of the Life Insurance Council of New York (LICONY), which represent over 80% of the life insurance industry in New York, agreed to extend to 90 days the grace period for the payment of premiums and fees, and for the exercise of policyholder or certificate holder rights, under life insurance policies and annuity contracts in cases of financial hardship due to the COVID-19 pandemic. The emergency regulation adopted by DFS ensures a level playing field by directing all regulated issuers of life insurance and annuity contracts in the state to give the same relief.

In  A# 10226, the New York Assembly also proposes to legislate business interruption insurance for certain small businesses. The bill provides in part as follows:

(a) 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.

(b) The coverage required by this section shall indemnify the insured, subject to the limits under the policy, for any loss of business or business interruption for the duration of a period of a declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.

(c)  This section shall apply to policies issued to insureds with less than 100 eligible employees in force on the effective date of this act. "Eligible employee" means a full-time employee who works a normal work week of 25 or more hours.

This act shall take effect immediately, and shall be deemed to have been in full force and effect on and after March 7, 2020 and shall apply to insurance policies in force on that Date.

The New York proposed legislation follows on the heels of similar legislative proposals in Massachusetts, Ohio and New Jersey.  If these legislative proposals are promulgated into law, the financial impact to the insurance industry could be devastating.  David Sampson, President and Chief Executive Officer (CEO) of the American Property Casualty Insurance Association (APCIA), has said that business continuity losses from the COVID-19 pandemic for small businesses with fewer than 100 employees, could reach as much as USD 383 billion per month.


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