New Regulation Seeks to Help New York Businesses Pursue Looting Insurance Claims

The economic fallout from the most recent civil unrest is particularly significant given that it impacted businesses already reeling from COVID-19...

The civil unrest that gripped the country last month will likely result in record riot losses, likely surpassing those in the wake of the 1992 acquittal of Los Angeles Police Department officers for using excessive force in the arrest of Rodney King. The economic fallout from the most recent civil unrest is particularly significant given that it impacted businesses already reeling from COVID-19.

For New York businesses that were looted, vandalized, or otherwise damaged, the good news is that business insurance policies generally cover property damage caused by such incidents. So while many companies have faced an uphill battle in filing business interruption claims related to the COVID-19 crisis, these claims should be more clear-cut.

NYDFS Emergency Regulation

In New York, businesses also have the benefit of a new emergency regulation that governs riot-related claims. On June 4, 2020, the New York Department of Financial Services  (NYDFS) issued emergency regulations requiring New York-regulated insurers to accelerate the resolution and payment of insurance claims by businesses and individuals who suffered damage as a result of looting. Small businesses and individuals may also require insurers to participate in mandatory mediation.

The regulations aim to help those who are struggling with the compounding effect of the COVID-19 pandemic and the looting. “DFS expects New York’s insurance industry to cooperate fully in expediting property damage claims due to looting, to allow claimants, including main street small businesses and households, to rebuild and recover,” Superintendent of Financial Services Linda A. Lacewell said in a press statement. “Regulated insurers have an obligation to move quickly, and this action will facilitate the effective processing and resolution of claims.”  

The emergency regulation is similar to an emergency regulation that NYDFS enacted after Super Storm Sandy. This time around, it applies to any claim filed on or after May 30, 2020, for loss of or damage to real property, loss of or damage to personal property, or other liabilities for loss of, damage to, or injury to persons or property resulting from a “riot or civil commotion in this State.”

Under the Seventeenth Amendment to 11 NYCRR 216 (Regulation 64):

• Insurers must commence an investigation of any claim filed by a claimant, or by a claimant’s authorized representative, within six business days of receiving notice of the claim
• Insurers must furnish to every claimant, or claimant’s authorized representative, a written notification detailing all items, statements and forms, if any, that the insurer reasonably believes will be required of the claimant, within six business days of receiving notice of the claim
• A claim filed with an agent of an insurer will be deemed to have been filed with the insurer unless, consistent with law or contract, the agent notifies the person filing the claim that the agent is not authorized to receive notices of claim.
• Where necessary to protect health or safety, a claimant may commence immediate repairs to the exterior windows, exterior doors, and, for minor permanent repairs, exterior walls of real property. Any policy requirement that the claimant exhibit the remains of the real or personal property may be satisfied by the claimant submitting reasonable proof of loss documentation of the damaged or destroyed property (without the need for a physical inspection), including photographs or video recordings; material samples, if applicable; and inventories, as well as receipts for any repairs to or replacement of property.
• If the insurer needs more time to determine whether the claim should be accepted or rejected, it must notify the claimant, or the claimant’s authorized representative, in writing, within 15 business days after receipt of such proof of loss or requested information. Insurers must provide specific reasons for the investigation delay and provide written updates every 30 days.
• Insurers must provide a detailed report to the NYDFS in every instance where the claim was not accepted or denied within 15 days of receipt of the proof of loss.

The emergency regulation also authorizes individuals and small-business policyholders to opt for mandatory mediation to resolve claims disputes. Insurers must provide written notification informing the claimant of the claimant’s right to request mediation and provide instructions on how the claimant may request mediation. Among other requirements, insurers must “participate in good faith in all mediations.”

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Charles Yuen, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.