Governments are closing or limiting access to non-essential businesses due to COVID-19. As a result, businesses are losing income and incurring expenses, such as sanitizing and testing insured property. Many businesses are looking to their insurance policies, specifically business interruption coverages, to potentially cover these losses and expenses. These policies, however, often expressly exclude viruses and disease and require an insured to add this type of coverage as an endorsement.

On March 16, 2020, the New Jersey Assembly Homeland Security and State Preparedness Committee met to discuss a bill that would require insurers to provide virus coverage. This new law would impose virus coverage requirements on insurers that specifically excluded it and even insurers that did not include first-party business interruption coverage in the policy. The coverage is limited to the coronavirus disease.

The law would apply to insureds with fewer than 100 eligible employees in New Jersey. An eligible employee is a full-time employee who works a normal workweek of 25 or more hours. The law would require coverage, subject to policy limits, for any loss of business or business interruption “for the duration of the declared State of Emergency.” If enacted, the law will take immediate effect and will be retroactive to March 9, 2020.
The law would permit insurers required to pay business interruption claims under the proposed legislation to recoup some of these payments by way of a reimbursement request to the New Jersey Commissioner of Banking and Insurance. Funding for the reimbursements would be through an “additional special purpose apportionment” that will be collected from carriers insuring risks in New Jersey. The funds will be distributed proportionately.

The full text of the bill can be found here.

On March 16, 2020, the bill was referred to the New Jersey Assembly Homeland Security and State Preparedness Committee, which voted in favor of the bill (4-1-1). The Assembly Committee reported out a Second Reading and there was an Emergency Resolution, which allows the Second and Third Reading of the bill to occur on the same day.

Both insureds and insurers should carefully monitor this proposed legislation. It may not be the last such effort by a legislature to mandate such coverage.