Last week, legislation was introduced in the New Jersey Assembly that would require property insurers to cover business interruption losses arising from the COVID-19 pandemic suffered by small businesses (i.e., businesses with less than 100 full-time employees who work 25 or more hours per week). The bill would require coverage for any loss of business or business interruption “due to global virus transmission or pandemic” that is suffered for the duration of the State of Emergency declared by Governor Murphy on March 9, 2020. It appears that such coverage must be provided regardless of existing policy requirements (e.g., direct “physical loss” or “damage”) or potentially applicable exclusions (e.g., the “Virus or Bacteria” exclusion in many policy forms). After an initial favorable vote by the NJ Assembly Homeland Security and State Preparedness Committee, the bill was reportedly withdrawn by its sponsors, but may be amended and reintroduced in the short-term.
The bill as initially drafted would provide significant relief to policyholders with small- to medium-sized businesses that may be the hardest hit in what is rapidly developing into a global economic crisis. This would certainly be welcome relief. However, that proposed relief comes with a potential backend cost to all policyholders in New Jersey. While insurers would have the obligation to indemnify policyholders for qualifying loss, the initial legislation provided that such insurers may apply for “relief and reimbursement” from the Department of Banking and Insurance, with such reimbursement funded by a “special purpose apportionment” imposed upon and collected from insurance companies engaged in the business of insurance in New Jersey. It seems likely this added cost ultimately will be passed to all policyholders on virtually all lines through increased premiums.
At this juncture, the proposed legislation has not been reintroduced. We will be closely monitoring all developments with this and any similar proposals. Stay tuned to this blog for future updates.