Proposed Bill Allowing Rider for Pandemic BI Coverage Moves Forward in New Jersey

June 11, 2021 by

A New Jersey bill that would allow business interruption insurers in the state to add a rider for virus and pandemic coverage is moving forward, with some in the industry saying it could encourage more insurers to provide this coverage.

“I would hope this bill might spur some insurers to consider bringing to the marketplace the pandemic-related BI coverage sooner than we anticipate,” said Steven C. Radespiel, owner of The Insurance Center of North Jersey Inc. in Maywood, New Jersey, and immediate past president of Professional Insurance Agents of New Jersey (PIANJ).

The bill, Assembly Bill 4551, was initially introduced in August by Assemblyman Roy Freiman and was approved by the Assembly Financial Institutions and Insurance Committee earlier this month. It now awaits a second reading in the state Assembly.

“Over the past year, we have seen just how significantly a business can be affected by a global pandemic with the untimely permanent closure of valued businesses throughout our state,” Freiman said in an emailed statement to Insurance Journal. “Limited staff availability, temporary shut-downs, supply chain interruptions and necessary safety precautions that may take place during a pandemic can all ultimately impact a company’s revenue.”

If passed, the bill would take effect immediately and apply to insurance policies issued on or after the date that the New Jersey Commissioner of Banking and Insurance approves a rider for global virus transmission or pandemic coverage. It would allow the Commissioner of Banking and Insurance to review and approve these riders on an expedited basis.

Insurers are already permitted to file policy forms with the state Department of Banking and Insurance (DOBI) that would allow for 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 will allow the product to reach the consumer that much quicker, if and when insurers decide to offer it,” he said.

This proposed bill is the latest move by Freiman in the state of New Jersey to tackle concerns over business interruption coverage during the global COVID-19 pandemic.

A New Jersey bill sponsored by Freiman that requires business interruption insurers to provide policyholders with a summary of coverage for loss of use and occupancy of a commercial property was signed into law by Governor Phil Murphy in May.

The bill – A-4805 – was introduced in October of last year and aims to achieve greater transparency between insurers and their clients during the ongoing COVID-19 pandemic. It requires that DOBI publish on its website a one-page summary of common insurance clauses regarding coverage for loss of use and occupancy of a commercial property and business interruption that may be used in a commercial insurance policy.

Another New Jersey bill proposed by Freiman in March of last year aimed to create business interruption insurance coverage 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 drew concern among insurers about the constitutionality and financial impact of this type of legislation.

The bill – New Jersey Bill A-3844 –is still active in the legislature but has not moved forward. If enacted, it would be retroactive for any insured with a business interruption policy in place from March 9, 2020, when New Jersey Governor Phil Murphy first declared a public health emergency and a state of emergency due to the virus. The bill would apply to New Jersey businesses with less than 100 eligible employees, meaning full-time employees working a normal week of 25 hours or more.

Radespiel said he believes this latest proposed bill is a better solution than A-3844 because it is a voluntary move that does not require carriers to retroactively cover a pandemic-related business interruption loss.

“[A-4551] is better in two main ways: it is not retroactive and does not force an insurer to offer the coverage if they do not want to,” he said. “…I wouldn’t expect much objection from the insurance industry.”

Although pandemic-related BI coverage doesn’t yet exist on a mass level, Radespiel said, he believes this could change.

“…insurers are not going to file a rider for global pandemic coverage during a global pandemic,” he said. “As we emerge from the COVID-19 pandemic, it is likely you will see this coverage being offered more.”

This is because insurers will have more historical data and experience to create actuarily sound rates for the coverage, he added.

“After the challenges the COVID-19 pandemic has presented our business community, it is prudent for us to find ways to mitigate these losses in the event of any future pandemics,” Freiman said in his statement to Insurance Journal. “Allowing businesses to seek out insurance coverage for business interruption caused by global virus transmission will help accomplish that going forward.”