By Bill Wichert

Law360 (June 21, 2021, 6:25 PM EDT) -- The New Jersey Assembly unanimously passed a bill Monday designed to extend insurance coverage to public health crises like the recent coronavirus outbreak, though attorneys have said the measure could provide insurers with another litigation tool for avoiding coverage of losses stemming from the COVID-19 pandemic.

In a 72-0 vote without any discussion, the Assembly signed off on A.B. 4551, which would purportedly authorize insurers to start offering a policy rider that would cover "global virus transmission or pandemic, or both." The legislation now awaits further action in the state Senate.

Following the Assembly vote, two of the bill's sponsors, Assemblymen Roy Freiman, D-Somerset, and Gary Schaer, D-Passaic, said Monday in a joint statement, "Over the past year, we have seen just how significantly a business can be affected by a global pandemic with the untimely permanent closure of valued businesses throughout our state."

"Limited staff availability, temporary shut-downs, supply chain interruptions and necessary safety precautions that may take place during a pandemic can all ultimately impact a company's revenue," the assemblymen said in the statement.

"After the challenges the COVID-19 pandemic has presented our business community, it is prudent for us to find ways to mitigate these losses in the event of any future pandemics. Allowing businesses to seek out insurance coverage for business interruption caused by global virus transmission will help accomplish that going forward," Freiman and Schaer added.

The legislation comes as insurers continue largely to prevail in pandemic coverage lawsuits from businesses in New Jersey state and federal courts, with disputes mostly centered on the meaning of policy phrases like "physical loss of or damage" to property and the applicability of virus exclusions.

Under Section 1 of the bill, "an insurer which issues policies insuring against loss or damage to property, which include the loss of use and occupancy and business interruption in this state, may offer to its insureds and prospective insureds 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."

The bill further holds that the commissioner of the state's Department of Banking and Insurance, or DOBI, "shall, on an expedited basis, review and approve, as appropriate, any insurance policy rider submitted by an insurer and designed to provide the coverage offered pursuant to [S]ection 1 of this act."

The bill would take effect immediately and "apply to policies of insurance issued on or after the date" when the commissioner approves such a rider.

An agency spokeswoman has said insurers can already submit pandemic coverage riders to DOBI for its approval.

But insurance companies could wield language in the bill to argue in litigation that policies without such riders do not cover losses in connection with the COVID-19 pandemic, experts have told Law360.

Insurer-side attorney Anthony L. Miscioscia of White and Williams LLP said a potential argument for insurers would be that the legislature "recognizes that current policies insuring against loss or damage to property do not provide coverage for global virus transmission or pandemic, and they recognize the need that there has to be some amendment or rider to existing policies in order for there potentially to be coverage."

Such an argument would be a fair one for insurers to make, Miscioscia said.

"I don't think it's twisting the bill or using it inappropriately or anything like that," Miscioscia said, adding that the argument would be "citing to the bill and its apparent recognition of the existing state of limited coverage and favorable court decisions."

But policyholders' attorney Jordan M. Rand of Klehr Harrison Harvey Branzburg LLP said the bill, if passed, will be "another issue muddying waters in existing litigation."

In those cases where insurers make the argument that the bill shows pandemic-related losses are not covered, it will be just another issue to "clutter the case," and judges will have to examine it, Rand said.

"Based on the amount of litigation already going on and the amount of motions to dismiss already being decided, it seems like courts have enough on their plate. They don't need another issue taking time away from the real dispute, which is, 'OK, we have these words "loss or damage." What do they mean?'" Rand said.

--Editing by Andrew Cohen.

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