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NJ Considering Legislation to Mandate Insurance Coverage for COVID-19 Pandemic

March 26, 2020

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<p style="text-align: justify;">Alarming news in New Jersey regarding the legislature’s apparent intent to force insurers to provide coverage for BI claims with respect to the COVID-19 Pandemic. New Jersey is threatening to rewrite insurance policies to include the COVID-19 pandemic as a covered peril, regardless of the language and exclusions in the policy. This appears to attempt to force insurers which provide BI insurance to indemnify the insured for COVID-19 elated closures and losses. The <a href="https://www.njleg.state.nj.us/2020/Bills/A4000/3844_I1.HTM">bill</a>, introduced as bill No. 3844, in its statement of rationale:</p>
<p style="text-align: justify;">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</p>
<p style="text-align: justify;"> 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.</p>
The exact language of the bill is equally alarming:
<ol>
<li style="text-align: justify;">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, <u>which includes the loss of use and occupancy and business interruption in force in this State on the effective date of this act</u>, 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.</li>
</ol>
<p style="text-align: justify;">The bill later indicates that coverage is subject to policy limits. This bill, in current form, only would require insurers that wrote a policy that included coverage for business interruption or loss of use to indemnify the insured. Specifically, “[t]he coverage required by this section shall indemnify the insured” but only applies to companies with less than 100 employees.</p>
This bill has not yet passed, but it is alarming news for insurers who have written insurance policies that generally exclude from coverage losses due to a virus.

Thanks to Matthew Care on his contribution to this post.  Please email <a href="mailto:gcoats@wcmlaw.com">Georgia Coats</a> with any questions.

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