Both the New Jersey Assembly and Senate recently passed identical legislation that would require insurers offering commercial coverage for loss or damage to property, including business interruption, to provide insureds with a general summary of common insurance clauses in policies for loss of use and occupancy of a commercial property, along with a disclosure relating to pandemic and virus losses.
The content of the required general summary would be developed by the Department of Banking and Insurance, through a “public stakeholder process,” and would be posted on the Department’s website. Accompanying the general summary, insurers would also need to prominently provide a particular form of disclosure notifying insureds that their “policy may not cover pandemics or viruses” and that “government ordered shutdown may not trigger business interruption coverage in the absence of physical damage to the insured property.” Whenever an insurer offers or renews commercial coverage for loss or damage to property, the general summary and form of disclosure would need to be provided.
For policies currently in force, the legislation provides that, within 90 days of the Department’s publication of the general summary on their website, insurers would be required to provide their insureds with both the general summary and the form of disclosure.
In effect, the legislation is a tool to apprise insureds that business interruption coverage traditionally operates to reimburse for losses due to the presence of physical damage to the property, rather than for losses in connection with a pandemic or virus which causes a forced shut down of the business.
The legislation expressly applies only to authorized insurers operating in the state—surplus lines insurers would not be required to provide either the general summary or the form of disclosure.
Currently, the legislation is with Governor Phil Murphy, awaiting enactment.
The text of each bill can be found at the following links:
NJ Assembly Bill A4805: https://www.njleg.state.nj.us/2020/Bills/A5000/4805_R1.PDF
NJ Senate Bill S3169: https://www.njleg.state.nj.us/2020/Bills/S3500/3169_U1.PDF
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