A New Jersey bill that would allow state business interruption insurers to add a driver for virus and pandemic coverage is being pushed, with some in the industry saying they could encourage more insurers to provide that coverage.
“I would hope that this bill could encourage some insurers to bring pandemic BI coverage to market earlier than expected,” said Steven C. Radespiel, owner of North Jersey Inc.’s insurance center in Maywood, New Jersey. and immediate past President of Professional Insurance Agents of New Jersey (PIANJ).
The bill, Assembly Bill 4551, was originally tabled by Assemblyman Roy Freiman in August and approved by the Assembly’s Financial Institutions and Insurance Committee earlier this month. He is now waiting for a second reading in the state parliament.
“Over the past year we have seen how badly a company can be affected by a global pandemic with the premature permanent closure of valued businesses across our state,” Freiman said in a statement emailed to Insurance Journal. “Limited staff availability, temporary downtimes, interruptions in the supply chain and necessary safety precautions that can be taken during a pandemic can all ultimately affect a company’s sales.”
If passed, the law would take effect immediately and apply to insurance policies issued on or after the date the New Jersey Commissioner of Banking and Insurance approves a driver for global virus transmission or pandemic coverage. It would allow the Banking and Insurance Commissioner to review and approve these tabs on an expedited basis.
Insurers are already allowed to submit policy forms to the State Department of Banking and Insurance (DOBI) that would enable global pandemic coverage. However, one of the main benefits of this bill is that it allows DOBI to review and approve Policy Riders on an expedited basis, Radespiel said.
“This allows the product to reach consumers much faster if insurers offer it,” he said.
This bill is the latest move by Freiman, New Jersey, to address business interruption coverage concerns during the global COVID-19 pandemic.
In May, Governor Phil Murphy signed a Freiman-sponsored New Jersey bill requiring business interruption insurers to provide policyholders with a summary of coverage for loss of use and occupancy of a commercial property.
The bill – A-4805 – was tabled in October last year and aims to achieve greater transparency between insurers and their customers during the ongoing COVID-19 pandemic. It requires that DOBI publish on its website a one-page summary of common insurance clauses to cover loss of use and occupancy of a commercial property and business interruption that can be used in commercial insurance.
Another New Jersey bill proposed by Freiman last March aimed to create business interruption insurance for COVID-19-related claims despite virus exclusions in many policies. It was the center of controversy in the industry at the start of the pandemic as it raised concerns among insurers about the constitutionality and financial implications of this type of legislation.
The bill – New Jersey Bill A-3844 – is still in the legislature, but has not been promoted. When it goes into effect, it would be retroactive for all those insured with business interruption insurance from March 9, 2020 when New Jersey Governor Phil Murphy first declared a public health emergency and state of emergency due to the virus. The bill would apply to New Jersey companies with fewer than 100 eligible employees, that is, full-time employees who work a typical week of 25 hours or more.
Radespiel said he believes this latest bill is a better solution than A-3844 as it is a voluntary move that does not require shippers to retrospectively cover a pandemic-related business interruption loss.
“[A-4551] is better in two ways: It’s not retroactive and doesn’t force an insurer to offer coverage if they don’t want to, ”he said. “… I wouldn’t expect much objection from the insurance industry.”
Although pandemic BI reporting does not yet exist on a massive scale, Radespiel believes this could change.
“… Insurers will not submit a driver for global pandemic coverage during a global pandemic,” he said. “Once we’re through the COVID-19 pandemic, this coverage will likely be more offered.”
This is because insurers will have more historical data and experience to create actuarially sound rates for coverage, he added.
“Given the challenges that the COVID-19 pandemic has posed for our business world, it is advisable for us to find ways to mitigate these losses in the event of a future pandemic,” Freiman said in a statement to the Insurance Journal. “The ability for companies to seek insurance coverage for business interruptions caused by virus transmission around the world will help achieve this in the future.”
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