In recent days a number of national auto insurance companies have begun to voluntarily issue partial refunds in light of COVID. On May 12, 2020, the New Jersey Department of Banking and Insurance mandated that insurance carriers re-evaluate policies and to issue refunds if insurance premiums are not commensurate with their risk.
Bulletin 20-22 explains that because the COVID-19 pandemic has severely curtailed activities of policyholders in both personal and commercial lines of insurance, projected loss exposures of many insurance policies have become “overstated or misclassified.”
As such, Bulletin 20-22 requires insurance carriers to re-evaluate policies and to issue refunds if the premium is not commensurate with the real risk levels.
The mandate applies to premiums paid since March 9, when Gov. Phil Murphy declared a state of emergency and lasts until the state of emergency is over.
Under the mandate, insurers must make a premium refund or other adjustment to all policyholders whose premiums had not been commensurate with their risk levels, no later than June 15. The mandate applies to premiums paid since March 9, when Gov. Phil Murphy declared a state of emergency and lasts until the state of emergency is over.
The mandate applies to:
- Private passenger automobile insurance;
- Commercial automobile insurance;
- Workers’ compensation insurance;
- Commercial multiple-peril insurance;
- Commercial liability insurance;
- Medical malpractice insurance; and
- Any other line of coverage where the measures of risk have become substantially overstated as a result of the COVID-19 pandemic
Where risks are misclassified and result in premium overcharges, insurers should immediately reclassify risks and adjust premiums. Some examples include:
- Reclassifying personal automobile exposure from “commute use” to “pleasure use”
- Reclassifying a physician practice to part-time status
- Excluding from workers’ compensation employees who are being paid, but not actively working
A copy of the bulletin may be found HERE.
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