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Habitat Magazine July/August 2020 free digital issue

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LEGAL/FINANCIAL

HOW LEGAL/FINANCIAL PROBLEMS ARE SOLVED BY NYC CO-OPS AND CONDOS

Class-Action Lawsuit Seeks Coverage for Income Lost in Pandemic

New York City

Business income insurance, COVID-19, lost income, co-op and condo boards.
May 12, 2020

The looming battle over lost-income insurance claims during the coronavirus pandemic has migrated from the New York State Legislature to a courtroom in Chicago, the Real Deal reports.

A Las Vegas-based company called Vegas Image has filed a class-action lawsuit in federal court in Chicago, arguing that its lost-income insurance policy, also known as business income insurance, does not exclude losses caused by “the spread of viruses.” Dino Robusto, chief executive of the company’s insurer, CNA Financial, counters that all of its policies have “exclusion barring coverage for viruses,” adding that “our property policy exclusionary language does not provide coverage for COVID-19, and as such we never collect a premium for it.”

 The lawsuit could have major implications for co-op and condo boards in New York, where most insurers have stated they will not cover claims related to income lost due to the coronavirus, such as rental from businesses in the building that were shuttered by state decree. These insurers base their stance either on specific exclusions for losses caused by viruses or bacteria, or on the fact that physical damage to a property – such as a fire or flood – must occur before lost-income claims are paid. Many insurers began excluding pandemic and disease coverage following the SARS epidemic of the 2000s, when many paid millions out in claims.

Meanwhile,  two state lawmakers from Brooklyn have introduced legislation in Albany that would force insurers to pay such claims. “This is an interruption on business on a very large scale,” state Sen. Andrew Gounardes, who introduced the bill in the Senate, says of the crippling financial fallout of the pandemic. “What good is carrying insurance if the insurance won’t pay a claim?”

Assemblyman Robert Carroll, who sponsored similar legislation in the Assembly, adds: “The insurance industry is sitting on $900 billion in reserves while small businesses who have paid business interruption premiums for years have their claims denied over and over again because the insurance industry claims COVID-19 doesn’t constitute a business interruption. This is absurd, greedy, immoral and factually incorrect.”

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