Today ISO released circular LI-CL-2020-010 providing an advisory notice to New York commercial lines policyholders to be furnished in connection with policies that provide business interruption and related coverages. The advisory notice follows a special call document released by the New York Department of Financial Services (DFS) dated March 10, 2020, pertaining to the novel coronavirus (COVID-19) outbreak and business interruption coverages.

The special call document provides instructions for property & casualty insurers providing commercial property insurance written in New York with respect to business interruption coverage provided in these types of policies. The document considers commercial property insurance to include Businessowners, Commercial Multi-Peril, and specialized multiple peril policies, along with other substantially similar insurance.

The DFS document instructs insurers to provide the following:

  • The volume of business interruption coverage, civil authority coverage, contingent business interruption coverage and supply chain coverage the insurer wrote that has not lapsed as of March 10, 2020, which should be expressed in amounts of direct premium, policy types and numbers of policies written of each type.
  • Each insurer should examine their policies issued and explain the coverage each policy offers in regard to COVID-19, both presently and as the situation could develop to change the policyholder's status.
  • For each policy type, insurers should prepare an explanation to policyholders which includes the following information:
  • The type of commercial property insurance or otherwise related insurance policy the insured holds.
  • If the insured's policy provides "business interruption" coverage, the insurer must provide the 'covered perils' under such policy. The insurer should also indicate whether the policy contains a requirement for "physical damage or loss" and explain whether contamination related to a pandemic may constitute "physical damage or loss". In addition, the insurer is asked to describe what type of damage or loss is sufficient for coverage under the policy.
  • If the insured's policy provides "civil authority" coverage, the insurer must describe what type of damage or loss is sufficient for coverage under the policy. The insurer should also describe any relevant limitations under the policy and explain 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.
  • If the insured's policy provides "contingent business interruption" coverage, the insurer must describe what type of damage or loss is sufficient for coverage under the policy.  The insurer must provide the "covered perils" under such policy. The insurer should also indicate whether the policy contains a requirement for "physical damage or loss" and explain whether contamination related to a pandemic may constitute "physical  damage or loss".
  • If the insured's policy provides "supply chain" coverage, the insurer must identify if the coverage is limited to named products or services from a named supplier or company. The insurer should also indicate whether the policy contains a requirement for "physical damage or loss" and explain whether contamination related to a pandemic may constitute "physical damage or loss".
  • For each of the instances of coverage described above, the insurer must provide the applicable waiting period under the insured's policy and indicate whether the amount of time coverage remains in effect once it becomes active for a given incident.
  • Any insurer that writes none of the business described above should notify DFS in a statement signed by an officer or other authorized representative of the insurer in lieu of complying with the provisions above.

    • In connection with these requirements, ISO provided the below sample advisory notices for use with the ISO Businessowners and Commercial Property policies that contain such business interruption related coverages. The notices will provide policyholders with information on certain policy provisions that may affect coverage with respect to the coronavirus in response to some aspects of the DFS document.

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