Gov. Phil Murphy signed A-4805 into law this week. The new law requires insurers to disclose critical information related to business-interruption coverage in commercial insurance policies to consumers.
Requirements for insurers
The new law serves to correct clients’ confusion about business-interruption coverage by requiring insurers to provide a one-page summary—which will be created by the Department of Banking and Insurance—of common insurance clauses related to business-interruption coverage. According to the law, the summary is required to include information about common triggers for business-interruption coverage; examples of perils that are covered typically; and a summary of common exclusions. A statement informing policyholders about the definition of business-interruption coverage, and that the coverage may not be triggered by a government-ordered shutdown also is required.
Admitted carriers are required to provide the one-page summary on all new and renewed policies that provide business-interruption coverage. And, the carriers must use the summary that was published by the DOBI specifically. Existing policyholders must receive the summary by Saturday, Nov. 13, 2021, which is within 90 days of its publication by the DOBI. The law does not apply to nonadmitted policies.
Since the start of the COVID-19 pandemic, the question about whether insurance coverage can be triggered by a global pandemic has been the focal point of thousands of lawsuits around the country. Before the pandemic, business interruption commonly was covered, but it was triggered infrequently. Few policyholders understood the scope or limitations of the coverage—this resulted in a lot of confusion and frustration for policyholders amid the pandemic.
What this means for agents
PIANJ was a strong advocate for this new law. Its primary purpose is to inform the consumer, but these requirements will provide producers with critical errors-and-omissions protection with little effort on their part, as it will be the DOBI’s responsibility to create the one-page summary.
Going forward, if policyholders claim that they were unaware of how their business-interruption coverage would (or would not) protect them, producers have a way to verify that their clients were sent information regarding the limitations of business-interruption coverage.
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.
