The life of a business can depend on its insurance carrier doing the right thing and promptly paying damages sustained by it quickly and efficiently after a loss. This is the reason many business customers obtain business interruption coverage from their insurance carriers. New York Courts recognize the importance of business interruption coverage to policyholders sustaining a loss.
One New York Court stated:
The very purpose of business interruption coverage would make [the insurance carrier] aware that if it breached the policy it would be liable to [the policyholder] for damages for the loss of their business as a consequence of its breach or made it possible for [the policyholder] reasonably to suppose that [the insurance carrier] assume such damages when the contract was made.1
New York’s highest state court, the Court of Appeals, has said:
Thus, the very purpose of business interruption coverage would have made [the insurance carrier] aware that if it breached its obligations under the contract to investigate in good faith and pay covered claims it would have to respond in damages to [its customer] for the loss of its business as a result of the breach.2
These comments by New York Courts reveal they understand the importance of coverage for business interruption. They indicate that by placing coverage for business interruption at the time the insurance contract is entered into, the insurance carrier recognizes how important this coverage is to its customer. If the insurance carrier fails to act as it should in handling the loss quickly and efficiently under its policy and the behavior leads to additional damages, like the collapse of the business, then the insurer could be held liable for that. These issues may be of particular importance to business owners in New York and New Jersey following Sandy, where the affects are still being felt and may continue.
1 Sabbeth Industries, Ltd. v. Pennsylvania Lumbermen’s Mut. Ins. Co., 656 N.Y.S. 2nd 475 (App. 3d Div. 1997).
2 Bi-Economy Market, Inc. v. Harleysville Ins. Co. of NY, 10 N.Y. 3d 187 (2008).