The NJ Assembly Homeland Security and State Preparedness Committee (“AHS” or “Committee”) met on Monday, March 16, 2020 to consider draft bill A3844 that would require Business Interruption (BI) insurers to provide coverage for economic losses due to the COVID-19 crisis.  Coverage for business or business interruption losses would be required despite a “virus” exclusion in the current policies.  The new law would apply to insureds with less than 100 eligible full time employees working at least 25 hours per week.  The policy would pay up to coverage limits for losses incurred during the State of Emergency.

The policy virus exclusion is removed through draft bill language that states the insurance coverage will “include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic”, related to COVID-19.

The draft bill moved rapidly through the Committee with votes of: Yes 4; No 1; Abstained Interested parties generally oppose the draft bill with three providing written testimony.  The interested parties were identified as the New Jersey Business and Industry Association (NJBIA), National Association of Mutual Insurers (NAMIC), Insurance Council of New Jersey, and the American Property Casualty Insurance Association (APCI)    There were suggested amendments in certain submitted testimony though the Committee did not take amendments.

Assemblyman Gary Schaer stressed the urgency of the COVID-19 situation that we are in “extraordinary difficult times” dealing with a “catastrophic prognosis” that deserves a quick response.  Schaer also stated he believes there should be the opportunity for the draft bill to be “amended to be more cohesive”.

Chairwoman Angela McKnight concluded discussion on the bill saying “this is a time that is new to all of us so we all have to pull together so that all New Jerseyans are taken care of”.

The legislative progress of the draft should be watched closely for a full Assembly vote and a move to the Senate. We can expect trades to come out strongly opposed to changing policy language during a policy period and insurers to challenge verbiage and definitions.  Both insurers and policyholders will be affected.  Insurers may be able to recoup some costs from an industry apportionment, though we understand those costs would be allocated to all insurers and eventually all policyholders in NJ.

We will continue to monitor for developments.

Visit our COVID-19 Resource Center often for up-to-date information to help you stay informed of the legal issues related to COVID-19.