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COVID-19 BI legislation held by NJ Assembly, higher premiums a concern

18th March 2020 - Author: Luke Gallin

It’s been reported that Bill A-3844, which would require business interruption policies to cover losses caused by the COVID-19 outbreak at certain businesses in New Jersey, has not been passed into law.

virusAs we reported yesterday, New Jersey Legislature was today scheduled to discuss a bill designed to force insurance firms of certain businesses to provide BI protection for COVID-19 losses, regardless if these policies have the regulator-approved ISO “virus” exclusion.

Analysts at Credit Suisse have now reported that the New Jersey Assembly failed to vote on the bill, after voting to consider it on an emergency basis by 63-0. According to news reports, no vote was taken for final approval with the NJ Senate set to convene on Thursday March 19th, 2020.

Credit Suisse cites local online news site New Jersey 101.5, which explains that 65 of the Assembly’s 80 members attended the session on Monday. 21 Bills passed with no opposition, while Bill A-3844 was listed for a vote but held.

The report notes that member Ron Dancer strongly opposed the Bill, voicing concerns that it would result in higher premiums. Reportedly, he suggested that the state should offer subsidies to cover such increases in premiums.

Dancer said: “There’s no free lunch here. And I understand that this is an emergent time, but we need to protect businesses, residents and the consumers of insurance policies.”

Analysts at Credit Suisse reiterated the fact that if this is eventually passed into law it would be challenged by insurers in court. Credit Suisse continues to explain that insurers would prevail in court just as they did in the aftermath of Hurricane Katrina, when the state called on certain carriers to pay claims insurance companies felt weren’t covered.

“Recall, the vast majority of commercial policies contain explicit language barring payout for virus-related business interruptions. We spoke with two P&C insurers who do business in the state of NJ yesterday and our sense was this is more of a headline risk as opposed to the state being able to ultimately prevail in the courts over contract law,” say analysts.

Businesses not being able to utilise insurance for business interruption losses as a result of the COVID-19 virus outbreak is an issue in New Jersey and beyond. As noted by analysts, most commercial policies explicitly exclude virus-related business interruption losses, and only in certain, and likely limited cases will companies have purchased additional cover that extends to outbreaks such as this.

In the UK, for example, many people are concerned that until the Prime Minister orders the closure of venues, businesses will not be able to call on their insurance when they need it the most. But, the reality appears to be that many companies around the world that purchase standard business interruption policies will not be covered for losses caused by the ongoing virus outbreak.

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