March 26, 2020
By Mohamed H. Nabulsi and Ryan M. Buehler
Newly-proposed legislation, introduced on March 16, 2020, would override business interruption insurance policies that exclude from coverage losses or damages resulting from viruses (such as COVID-19) and, thus, require that the applicable carrier provide the insured with business interruption coverage for losses/damages resulting from COVID-19. New Jersey Bill A3844, applies to businesses with less than 100 “Eligible Employees” (as defined in the Bill) that had business interruption insurance in place at the time Governor Murphy issued Executive Order 103 declaring a Public Health Emergency and State of Emergency on March 9, 2020. The Bill provides that “every policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption in force in this State on the effective date of this act, shall be construed to include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic.”
If adopted, New Jersey businesses satisfying the criteria set forth in the Bill would be entitled to coverage pursuant to the legislation even though their business interruption policy in place excludes loss or damages resulting from viruses. The covered losses would be subject to the limits of the policy and be limited to the period of the State of Emergency. Additionally, the Bill provides a mechanism for the indemnifying insurer to apply to the Commissioner of Banking and Insurance (“Commissioner”) for relief and reimbursement from a fund subject to procedures and qualifications established by the Commissioner.
Though the “virus” coverage exclusion is fairly common in business interruption policies, businesses should not assume that their business interruption policy includes this exclusion, and it would be worthwhile for a business to carefully review such policy with their legal counsel to determine whether or not such an exclusion exists.