Shifting Business Interruption Risk Allocation In A Post-Sandy World

Landlords hit by insurance exclusions in the aftermath of Hurricane Sandy are hitting back by requiring tenants to use the proceeds of business interruption insurance to pay rent.

Before Hurricane Sandy hit the United States in October 2012, in the event of a casualty adversely affecting a tenant's ability to operate its business or access its premises, casualty provisions in commercial leases in New York City typically provided for an abatement of rent in proportion to the affected area of the premises. As a separate stand-alone covenant, tenants were often required to maintain business interruption insurance, which was usually equal to a fixed dollar amount or the sum of a predetermined number of monthly rent payments.