NEW JERSEY’S PROPOSED BUSINESS INTERRUPTION INSURANCE BILL
Currently, COVID-19 is wreaking havoc and disrupting businesses worldwide. Businesses everywhere have begun to look towards their business interruption insurance policies in an effort to mitigate losses associated with the Pandemic.
As many of us in the industry know, it is common that business interruption insurance does not provide coverage for pandemics such as COVID-19, as these policies often have a requirement for “physical” damage, which is not present in a pandemic scenario. During past catastrophe level events, such as the SARS outbreak in 2002-2003, courts widely construed, or ignored the “physical” damage requirement. However, despite past precedent, the “physical” damage requirement in most policies has not been removed.
In the Northeast, we have begun to hear radio commercials from law firms who are actively seeking out clients whose business interruption insurers have denied claims. Moreover, some firms have begun to add COVID-19 business interruption insurance policy review advertisements on their webpages. Clearly, our adversaries are anticipating a vast amount of denials that may warrant legal representation in order to be addressed.
In an effort to combat these coverage denials, New Jersey recently joined several other states when the NJ Assembly introduced Bill A-3844.[1], to provide a mechanism by which certain business that suffer business interruption losses as a result of COVID-19 may recover from their insurer if they had business interruption insurance in force as of March 9, 2020, which is the date that Governor Murphy declared Public Health and State of Emergencies.
In short, the Proposed Bill provides coverage for business interruptions due to pandemic as follows:
1. Every insurance policy insuring against property damage, which includes loss of use and business interruption, shall be construed to include among the covered perils, coverage for business interruption due to global virus transmission or pandemic;
2. The coverage required by the Act shall indemnify an insured, subject to the policy limits, for losses caused by business interruption for the duration of the declared State of Emergency; and
3. The Act applies to businesses with less than 100 employees, who work 25 hours or more per week.
On its date of introduction, March 16, 2020, the Proposed Bill was approved to advance to a second reading, however, it was removed from the legislative calendar after insurance industry representatives raised concerns about the potential consequences (e.g., premiums were not calculated to include pandemics, etc.). The Bill, in its current form, will not likely be passed, however, it will be interesting to see the changes that are discussed between the legislators and the insurance industry moving forward.