During the week of March 7, the RiskGenius team urgently began evaluating potential insurance coverage issues presented by the COVID-19 Pandemic. Not surprisingly, businesses were also evaluating whether they had insurance coverage available to cover losses sustained as a result of the pandemic. Those businesses had many questions, according to a New York Department of Financial Services letter that was issued March 10, 2020 (“NYDFS Letter”):
“In connection with the outbreak of the novel Coronavirus (“COVID-19″), policyholders have urgent questions about the ‘business interruption” coverages provided by their commercial property insurance policy.’”
In response to policyholder inquiries, the NYDFS issued a letter requiring insurance carrier to provide specific information regarding commercial property, businessowners, and multi-peril policies. Notably, this information must be provided to each insured and the insurance department. The information request is extensive and focuses on coverage issues that could impact commercial insurance claims scenarios emerging from the COVID-19 Pandemic.
Whenever the RiskGenius team faces a new, emerging risk to evaluate in insurance policies, we create a checklist of potential coverage issues. We use our insurance wordings taxonomy to categorize insurance policy clauses in a systematic, objective manner. The categorization allows us to apply a checklist across many policies (hundreds or thousands) from one or more carriers.
In order to assist insurance carriers required to comply with the NYDFS Letter, we created “NYDFS COVID-19 Checklist 1.0”. NYDFS COVID-19 Checklist 1.0 addresses the requirements established by the NYDFS Letter. We are sharing it with the insurance industry in the hope it will streamline the coverage analysis required by the NYDFS. As of March 15, 2020, the RiskGenius software was used to analyze COVID Coverage issues for two top-50 Property and Casualty insurance carriers. If you have questions about how the NYDFS COVID-19 Checklist can be applied to your insurance policies, please contact the RiskGenius team (email us at firstname.lastname@example.org).
Summary of the NYDFS Letter
The focus of the NYDFS Letter is commercial property insurance policies. In addition to mentioning “business interruption” coverages, the letter also notes that “covered perils” and “physical loss or damage” may “vary in treatment” and are a part of the focus of the inquiry.
The letter requests portfolio level information and disclosure to individual insureds:
NYDFS Compliance Checklist Items. These items are to be evaluated in aggregate and the information is to be provided to the NYDFS upon completion. Some insurance carriers will be able to extract this information via a query of a Policy Administration System. If this is not possible, then information that is collected for Reservation of Rights letters can be used to determine the aggregate amounts. In the NYFDS COVID Checklist 1.0, please refer to this section:
Insured ROR Checklist Per NYDFS. These items are to be evaluated and disclosed to each insured and to the NYDFS. The information requested is extensive. It may prove extremely difficult for an insurance carrier to comply with these requirements if manual review of each insurance policy is the only solution. In the NYFDS COVID Checklist 1.0, please refer to this section:
It appears the New York Department of Financial Services will use this information to evaluate how carrier coverage impacts businesses en masse, while simultaneously requiring Reservation of Rights letters be sent to businesses regarding these issues.
If you need help
The information that is to be contained in Reservation of Rights (ROR) letters may prove difficult for carriers to produce in a timely manner. The information request is extensive; if the information is not available for query in a Policy Administration System then underwriters will be analyzing policies for weeks or months. Insurance carriers are to send this analysis to both the insured and the NYDFS by March 18, 2020. It is unclear if carriers will be able to respond in a timely manner.
Additionally, the information requested could prove problematic in future litigation. The NYDFS asks insurance carriers to evaluate coverage in each policy “both presently and as the situation could develop to change the policyholder’s status.” This forward-looking analysis could be particularly difficult for insurance carriers.
If you need help, please do not hesitate to contact RiskGenius (email us at email@example.com). If possible, we will provide guidance regarding the checklists we have published. We can also apply the RiskGenius software to your insurance policies portfolio en masse to create the requisite information requested by the NYDFS. We are here to help.