With businesses across the Garden State struggling to secure such coverage amid the COVID-19 pandemic, the Assembly Financial Institutions and Insurance Committee approved A.B. 4551, which would enable insurance companies to offer a policy "rider" that would extend coverage for "global virus transmission or pandemic, or both."
"No longer are these businesses going to have to turn to page 17, subparagraph three, and realize, 'Wait a minute. I'm not covered ... and I'm left vulnerable,'" committee member and one of the bill's sponsors, Assemblyman Roy Freiman, D-Somerset, said during Wednesday's virtual hearing. "That's what this legislation is about."
The legislation, which was introduced in August, tackles a coverage issue that has sparked litigation in New Jersey state and federal courts after insurers refused to cover pandemic-related losses for businesses that took financial hits in the wake of government restrictions aimed at curbing the spread of COVID-19.
Under section one of the bill, "an insurer which issues policies insuring against loss or damage to property, which include the loss of use and occupancy and business interruption in this State, may offer to its insureds and prospective insureds a rider to such an insurance policy which includes, as a covered peril under that policy, coverage for global virus transmission or pandemic, or both."
The bill further holds that the commissioner of the state's Department of Banking and Insurance, or DOBI, "shall, on an expedited basis, review and approve, as appropriate, any insurance policy rider submitted by an insurer and designed to provide the coverage offered pursuant to section 1 of this act."
The legislation would take effect immediately and apply to insurance policies issued on or after the date when the DOBI commissioner approves such a rider.
At Wednesday's hearing, Freiman noted that, during the pandemic, many businesses with business interruption insurance have been "universally disappointed to find out that they did not receive coverage for the pandemic, that it was excluded."
In speaking with insurers, businesses have often been told that "'not only do we not offer it, but we're not allowed to offer this type of coverage. The Department of Insurance doesn't even allow us to offer this type of coverage,'" according to Freiman.
The bill "basically informs and instructs DOBI to say, 'No, we need to permit this type of coverage on business interruption,'" said Freiman, adding that the legislation directs the agency, when insurers seek approval to offer such coverage, to "rush this through and get this out in the marketplace, so the insurers can start offering this."
The committee's chairman, Assemblyman John McKeon, D-Essex, later praised the bill's sponsors for "being adept at getting the insurance industry on board with this."
"That's no small feat," McKeon added during the hearing.
One industry trade group — the Insurance Council of New Jersey — has taken a "neutral" position on the legislation, ICNJ President Christine O'Brien told Law360 after Wednesday's hearing.
"In general, we appreciate the legislative sentiment to encourage expedited review of business interruption coverage riders by the New Jersey DOBI," O'Brien said.
A critical element of the bill is that offering such riders would be voluntary and insurers "'may'" do so, according to O'Brien.
"It's a very important piece, and actually that one word is what allows the industry to remain neutral on the bill from a public policy perspective," O'Brien said.
--Editing by Daniel King.
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