New Jersey Moves Bill To Permit Insurers To Offer Pandemic-Related Riders

The New Jersey Assembly committee moved a bill last week that would allow insurance companies to offer coverage add-ons that would extend coverage for pandemic-related losses.

The Assembly Financial Institutions and Insurance Committee approved AB 4551, which would allow insurers to offer "a rider to such an insurance policy which includes, as a covered peril under that policy, coverage for global virus transmission or pandemic, or both.”

It was initially introduced in August.

"No longer are these businesses going to have to turn to page 17, subparagraph three, and realize, 'Wait a minute. I'm not covered ... and I'm left vulnerable,'" Assemblyman Roy Freiman, D-Somerset, said during a committee hearing.

The bill also requires the Commissioner of Banking and Insurance to review and approve, as appropriate, any insurance policy rider submitted by an insurer and designed to provide the coverage offered pursuant to the bill on an expedited basis.

The New Jersey bill is an attempt to address a thorny issue that continues to play out in courts across the country. Businesses owners maintain that business interruption insurance should apply to the COVID-19 pandemic interruption. But insurers say pandemics are excluded under most policies.

There are still hundreds of lawsuits pending and insurers have said costs could run into the billions if they were held responsible for businesses closing down.

Many of the suits claim that coverage for “direct physical loss or damage to property” was triggered by shutdowns ordered by civil authorities. In other words, the shutdown orders caused the business owners to suffer a “direct physical loss” of the use of their properties.

So far, most judges have rejected that argument and dismissed cases before they can advance to a jury trial.