How Your Co-op or Condo May Be Affected By Recent Insurance Policy Changes

There's more. All policies have a "civil authority" or "evacuation" clause. If you didn't have any damage to your building from a hurricane or neighboring fire, but the government says you have to evacuate, the building only gets up to 30 days' worth of loss of business income coverage. Unit-holders' individual co-op and condo policies only provide two weeks of civil authority coverage. But there could be scenarios where you or your building's unit-owners or shareholders may be out for more than two weeks or 30 days. The building would then have to absorb the cost if unit-owners and shareholders aren't paying their maintenance during that time because they're paying to live somewhere else.

So, on the one hand, New York has a public safety policy to evacuate people before a major storm hits. On the other hand, the insurer can say that, under the policy, you have no coverage for it. Consequently, people are forced into an unfortunate choice: do they want to incur that expense out of their own pocket or do they just decide to ride out the storm? Does it make sense to have that kind of disconnect between a sane policy for public safety and an insurance policy for coverage?

What should boards do? They need write to the New York State's Department of Financial Services' Superintendent of Insurance and request that an emergency regulation be issued that would modify the civil authority insurance clauses in residential property insurance policies by extending the civil authority coverage period to (1) no less than the period of the evacuation or vacate order and (2) for such reasonable additional period deemed necessary by the co-op or condo boards for the health and safety of their residents up to the policy period limit for loss of business income.

When renewing their building's policies, boards should seek coverage that provides a business income period cap of two years.

Brooks White has spent 30+ years as a corporate insurance attorney and as a private attorney, consultant, and arbitrator on insurance and other legal, benefits and governance issues.