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Bill Would Enhance Existing Business Interruption Insurance

Governor George E. Pataki today announced that he has introduced legislation to enhance insurance protections available to New York State business owners by broadening the circumstances under which business owners are allowed coverage for economic loss resulting from governmental actions in times of emergencies.

The bill creates a new kind of insurance, "Civil Authority insurance," that would authorize insurers to provide coverage in the event an action of a government authority results in a loss of business income. This expands on existing Business Interruption insurance coverage by eliminating the prerequisite of actual physical damage to the insured’s premises as the trigger for such coverage.

"This is an important change that must be made to protect businesses from situations that are beyond their control and which could substantially hurt their operations," Governor Pataki said. "Unfortunately, present Business Interruption insurance does not recognize actions taken by local, state or federal governments that could prevent a business from opening. This bill will help New York State business, especially small businesses, stay in business during trying times."

In recent years, millions of dollars have been lost by businesses as a result of necessary government action that forced business closures for a period of time because of circumstances beyond an insured’s control. The North Country Ice storm of January 1998 necessitated the closing of many roads due to the dangerous ice conditions. Similarly, in 1998, the dangerous conditions involving buildings in New York City’s Times Square and on Madison Avenue required the streets to be closed for extended periods of time, shutting down businesses that were physically undamaged, but in proximity to the hazardous conditions. Since there was no physical loss to these businesses, Business Interruption coverage was not triggered.

New York State Insurance Department Superintendent Neil D. Levin said, "The Governor’s initiative exemplifies the administration’s continued commitment to improving New York State’s business environment. Recent natural disasters and other emergency situations show the need to bridge the gaps in coverage that exist under the terms of current policies. The Governor’s bill responds to this need and provides coverage that is a vital component for a business’ financial well being."

Department of Financial Services


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