The New Impacts of New York’s Business Interruption Law

On October 27, 2024, Governor Kathy Hochul signed New York Assembly Bill A10342 into law, introducing a transformative change in business insurance. For the first time, businesses in New York can access stand-alone business interruption insurance that isn’t tied to physical damage — a response to the challenges highlighted by the COVID-19 pandemic. This legislation opens the door for insurers to offer tailored coverage for significant risks such as pandemics or active threats, offering businesses new ways to safeguard their operations against disruptions.

Stand-alone insurance policies are designed to address a particular risk or need without including additional coverages that may be included in a broader insurance package. This bill could expand the already wide variety of business interruption claims. Some of the most well-known business interruption claims in recent years include:

• Natural disasters: Events such as hurricanes, wildfires and floods have resulted in significant business interruption claims, as businesses face disruption to their operations and revenue streams following these catastrophic events.
• Cyberattacks: Cyber incidents such as ransomware attacks and data breaches can lead to business interruption claims as companies experience disruptions to their IT systems and operations, resulting in financial losses.
• Supply chain disruptions: Disruptions in the supply chain, whether due to transportation issues, supplier failures or other factors, can trigger business interruption claims as businesses struggle to maintain operations and meet customer demand.
• COVID-19 pandemic: The global pandemic led to numerous business interruption claims as businesses were forced to close or reduce operations due to government-mandated lockdowns and restrictions. Many policyholders filed claims seeking coverage for lost income and expenses incurred during the shutdowns.
• Civil unrest: Instances of civil unrest, protests or riots can lead to business interruption claims as businesses may be forced to close or incur damages to their property, resulting in financial losses.

Business interruption claims are essential for businesses as they provide financial protection and support during periods of operational disruption. By filing these claims, businesses can mitigate the impact of unforeseen events such as natural disasters, fires or pandemics on their revenue and expenses. This insurance coverage helps maintain business continuity by covering ongoing costs like payroll and rent, ensuring that the organization can weather challenging times and recover more swiftly.

Calculating lost profits in a business interruption claim involves a detailed financial analysis to determine the income that would have been earned if the interruption had not occurred. Managing these claims involves a structured approach to assessing and quantifying the financial impact of the interruption, which often includes:

• Assessing the financial impact: Take a look at the financial repercussions of the interruption by analyzing financial records to gauge the extent of the impact on the organization.
• Calculating the claim amount: Determine the claim amount based on policy coverage and documented financial losses, including lost profits, extra expenses incurred and other relevant costs.
• Documenting the claim: Thorough documentation is essential to support the business interruption claim. Compile evidence of the financial impact, such as financial statements and sales records, to substantiate the claim.

Business interruption claims require a methodical approach to assessing financial impact, calculating claim amounts and documenting claim support. At Weaver, we understand the critical importance of safeguarding your business against unforeseen disruptions. Contact us to discuss your needs related to business interruption claims.

Authored by Logan Woods

©2024