Assembly, No. 3844, State of New Jersey, 219th Legislature, Introduced March 16, 2020

Summary

Assembly Bill 3844 of the 219th Legislature of the State of New Jersey, introduced March 16, 2020. The bill would require every property insurance policy covering loss of use and occupancy and business interruption, in force in the State, to be construed as covering business interruption due to global virus transmission or pandemic, as declared in Executive Order 103 of 2020. It applies to insureds with less than 100 eligible employees, meaning full-time employees working 25 or more hours a week, and indemnifies losses for the duration of the State of Emergency, subject to policy limits. Insurers that pay claims could seek reimbursement from the Commissioner of Banking and Insurance, funded by a special purpose apportionment on insurers. The bill is retroactive to March 9, 2020.

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Full text

An Act concerning certain covered perils under business
interruption insurance and supplementing Title 17 of the Revised Statutes.

Be It
Enacted by the Senate and General Assembly of
the State of New Jersey:

1. a. Notwithstanding the
provisions of any other law, rule or regulation to the contrary, every policy
of insurance insuring against loss or damage to property, which includes the
loss of use and occupancy and business interruption in force in this State on
the effective date of this act, shall be construed to include among the covered
perils under that policy, coverage for business interruption due to global
virus transmission or pandemic, as provided in the Public Health Emergency and
State of Emergency declared by the Governor in Executive Order 103 of 2020 concerning
the coronavirus disease 2019 pandemic.

b. The coverage required by
this section shall indemnify the insured, subject to the limits under the
policy, for any loss of business or business interruption for the duration of
that declared State of Emergency.

c. This section shall
apply to policies issued to insureds with less than 100 eligible employees, in
the State of New Jersey, and in force on the effective date of this act. "Eligible
employee" means a full-time employee who works a normal work week of 25 or
more hours.

2. a. An insurer which indemnifies
an insured who has filed a claim pursuant to section 1 of this act may apply to
the Commissioner of Banking and Insurance for relief and reimbursement by the
commissioner from funds collected and made available for this purpose as
provided in section 3 of this act.

b. The commissioner shall
establish procedures for the submission and qualification of claims by insurers
which are eligible for reimbursement pursuant to this section. The
commissioner shall incorporate in these procedures such standards as are
necessary to protect against the submission of fraudulent claims by insureds,
and appropriate safeguards for insurers to employ in the review and payment of
such claims.

3. a. In addition to the
special purpose apportionment made pursuant to section 2 of P.L. 1995, c.156
(C.17:1C-20), the Commissioner of Banking and Insurance is authorized to impose
upon, distribute among, and collect from the companies engaged in business
pursuant to subtitle 3 of Title 17 of the Revised Statutes, such additional
amounts as may be necessary to recover the amounts paid to insurers pursuant
to section 2 of this act.

b. The additional special
purpose apportionment authorized pursuant to subsection a. of this section
shall be distributed in the proportion that the net written premiums received
by each company subject to the apportionment authorized by this section for
insurance written or renewed on risks in this State during the calendar year
immediately preceding, bears to the sum total of all such net written premiums
received by all companies writing that insurance or coverage within the State
during that calendar year, as reported. The commissioner shall adopt the same
procedures and calculations as are provided in section 2 of P.L.1995, c.156 (C.17:1C-20)
as appropriate to calculate the additional special purpose apportionment
authorized by this section.

c. For the purposes of
this section, “net written premiums received” means gross direct premiums written,
less return premiums thereon and dividends credited or paid to policyholders,
as reported on the company’s annual financial statement.

4. This act shall take
effect immediately, shall be retroactive to March 9, 2020 and shall apply to
insurance policies described in section 1 of this act and in force on that date.

STATEMENT

This bill provides a mechanism
by which certain businesses that suffer losses due to interruption as a result
of the coronavirus disease 2019 pandemic may recover those losses from their
insurer if they had a policy of business interruption insurance in force on
March 9, 2020, the date on which the Governor declared a Public Health
Emergency and State of Emergency in Executive Order 103. The bill would apply
to businesses covered by such a policy with less than 100 eligible employees in
the State of New Jersey. "Eligible employee" is defined as a
full-time employee who works a normal work week of 25 or more hours

The bill provides that every
policy of insurance insuring against loss or damage to property, which includes
the loss of use and occupancy and business interruption, in force on the date
of the Executive Order, shall be construed to include among the covered perils
under that policy coverage for business interruption due to global virus
transmission or pandemic, as provided in the Governor’s Executive Order. The
coverage provided would be subject to the limits under the policy and would
indemnify the insured for losses incurred during the State of Emergency.

The bill then provides that an
insurer which indemnifies an insured who has filed a claim pursuant to its
provisions may apply to the Commissioner of Banking and Insurance for relief
and reimbursement from funds collected and made available for this purpose as
provided in the bill, pursuant to an additional special purpose assessment
under the general scheme already established by law to recover the general
expenses of the Department of Banking and Insurance as the regulator of the
insurance industry in this State. The commissioner shall establish procedures
for the submission and qualification of claims by insurers which are eligible
for reimbursement, incorporating such standards as are necessary to protect
against the submission of fraudulent claims by insureds, and appropriate
safeguards for insurers to employ in the review and payment of such claims.

Finally, the bill authorizes
the commissioner to impose upon, distribute among, and collect from insurance
companies, other than life and health insurance companies, the additional
amounts as may be necessary to recover the amounts paid pursuant to the bill.
The additional special purpose apportionment authorized by the bill shall be
distributed according to essentially the same procedures and calculations as
are provided currently for the existing special purpose apportionment.

Industry sources have
indicated that global virus transmission and pandemic are generally excluded
from the list of covered perils under the existing standard business
interruption insurance policy. The Insurance Services Office, ISO, has
developed a rider to provide an insured with the option of purchasing such
coverage, but to date, no states have yet approved the form. This bill, then,
is intended to hold harmless a certain portion of the business sector, which
had the foresight to purchase business interruption insurance, for losses
sustained as a result of the current health emergency, but for which no such
coverage is currently offered.

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