On March 29, 2020, Executive Order No. 202.13 (“EO 202.13”) imposed a moratorium on insurers cancelling or non-renewing any property or casualty insurance policies in order to benefit insureds facing financial hardship as a result of the COVID-19 pandemic. Likewise, on March 30, 2020, the New York State Department of Financial Services enacted an Emergency Regulation (the “Emergency Regulation”) that imposed an identical moratorium on insurers. However, are EO 202.13 and the Emergency Regulation (collectively the “Federal and State Regulations”) applicable to an insurer who served a Notice of Cancellation or Non-Renewal (“Notice”) within a week of the Federal and State Regulations taking effect? According to the Supreme Court of New York, New York County, the Federal and State Regulations are not applicable to insurers who served a Notice prior to the Federal and State Regulations being issued, even if the Notice was not effective until after March 2020.
In 450 Grand Avenue Realty LLC v. Technology Insurance Company Inc., 2022 WL 260451 at *1 (N.Y. Sup. Ct. 2022), defendant insurer (the “Insurer”) issued a policy of insurance (the “Policy”) insuring the plaintiff insured’s (the “Insured”) premises, including risk of loss by fire. The Policy commenced on March 8, 2020, and was set to expire on March 8, 2021. On March 24, 2020—within a week of the Federal and State Regulations being imposed—the Insurer served a Notice that went into effect on April 26, 2020. Subsequently, on June 11, 2020, the Insured’s building suffered loss and damage caused by a fire and the Insurer disclaimed coverage. As such, the Insured sued seeking to recover $250,000 in building damage and $40,000 for loss of business income, rental value, and extra expenses that it asserts should be paid by the Insurer pursuant to the Policy.
The Insurer moved the Court to dismiss the complaint on the grounds that the Insured was not covered by insurance on the date of loss. Specifically, the Insurer claimed that it sent the Insured a Notice on March 24, 2020, effective on April 26, 2020, and that the Policy was cancelled before the Federal and State Regulations were issued. Conversely, the Insured stated the Notice was rendered invalid by the Federal and State Regulations, and that the Federal and State Regulations were created for situations such as presented here. The Insurer maintained that the Insured did not have a legally cognizable cause of action against the Insurer as it is irrefutable that the Policy was not cancelled due to financial hardship straining from the COVID-19 pandemic.
Ultimately, the Supreme Court of New York, New York County, held that the Policy was cancelled before the Federal and State Regulations were promulgated. However, the Court noted that—even if the Notice was rendered invalid by the Federal and State Regulations—the moratoriums only applied to insureds experiencing a financial hardship due to the COVID-19 pandemic, and the Insured failed to demonstrate that it suffered financial hardship related to the COVID-19 pandemic in its opposition papers. Consequently, the Court granted the Insurer’s motion to dismiss in its entirety and dismissed the Insured’s complaint.