Key Takeaways

• Following a short-lived stay, the New Jersey legislature will vote on Assembly Bill 3844, tomorrow, March 25, 2020

• The proposed law would require every property policy that provides coverage for the loss of use of property and for occupancy and business interruption to be “construed” to include coverage for business interruption due to COVID-19

• The law would apply to policies in effect in New Jersey on March 9, 2020 issued to insureds with less than 100 “eligible employees” in the state

As we reported on March 16, 2020, the New Jersey legislature was considering a bill that would require insurers to cover business interruption losses due to COVID-19, even if the losses were expressly excluded under the policies. While there was some indication that the legislature was tabling this bill for the time being to allow negotiations between the legislature and the insurance industry, the General Assembly has now decided to vote on the bill—tomorrow, March 25, 2020.

Assembly Bill 3844

The proposed law—Assembly Bill 3844—would require every property policy that provides coverage for the loss of use of property and for occupancy and business interruption to be “construed” to include coverage for business interruption due to COVID-19. The law would require indemnification of insureds for any loss of business or business interruption for the duration of the State of Emergency that New Jersey Governor Phil Murphy declared on March 9, 2020, subject to the policy limits.

The law would apply to policies in effect in New Jersey on March 9, 2020 issued to insureds with less than 100 “eligible employees” in New Jersey. The term “eligible employee” is defined as “a full-time employee who works a normal work week of 25 or more hours.”

Under the bill, an insurer that indemnifies an insured for a loss presented under the law may apply to the Commissioner of Banking and Insurance for relief and reimbursement by the Commissioner for the amounts paid. In turn, these costs will be passed on by the Commissioner to insurers operating in New Jersey (other than life and health insurers) through the established annual special purpose apportionment distributed among these insurers and through the Commissioner’s authority under the law to collect from these insurers additional monies necessary to recover amounts it pays for COVID-19 claims.

If passed, the law would take effect immediately, and would be retroactive to March 9, 2020.

Recent Legislative Posture

The bill had previously been voted out of the Assembly Homeland Security and State Preparedness committee on March 16, 2020 and posted for a floor vote in the General Assembly on March 18, 2020.  The bill, however, was pulled from the legislative calendar, reportedly to allow legislators and insurers to weigh in on the bill’s provisions and impact.

This short-lived stay has ended, as the General Assembly now appears poised to vote on the bill tomorrow.

We will continue to follow all developments relating to this proposed legislation.

For more information on this proposed legislation and its impacts on the insurance community, please contact:

• Christian A. Cavallo
• Jared T. Greisman
• Or another member of our Global Insurance Services practice or Coronavirus Coverage Team