As the one-year anniversary of Superstorm Sandy approaches, members of the New Jersey Assembly proposed two pieces of legislation addressing coverage issues that arose in the wake of the storm. The bills would expand coverage for claims involving concurrent causes of loss and create coverage for the removal of leaking underground oil tanks.
The first bill, A. 4467, would prohibit the use of anti-concurrent clauses in homeowners policies issued in the state. The legislation seeks to amend New Jersey insurance law and prohibit insurer reliance on anti-concurrent causation (ACC) clauses to deny coverage for property damage caused by a covered cause of loss and by an excluded event or peril. This proposed bill is in response to constituent complaints arising from Superstorm Sandy.
The purpose of the bill, like similar bills proposed in New York, is to prohibit an insurer from denying or excluding coverage for loss or damage claims that would otherwise be covered by a homeowners policy (e.g., wind) solely because an uncovered peril or cause of loss (e.g., flood or water) was a contributing factor. The proposed legislation states that ACC clauses, in homeowners policies, shall be void and unenforceable.
Sandy also brought new attention to an old problem – leaking underground oil tanks at residential properties. The flood waters of the storm displaced oil from old tanks buried in the barrier island communities of the coast, causing property and groundwater contamination. The second bill requires insurers to provide coverage for the removal of leaking oil tanks and the remediation of damage caused by leaking oil. Under the bill, insurers would have to offer leaking tank coverage with all new and renewal policies. The insured can decline the coverage, but the insurer must obtain a notarized written waiver from the insured.
The bill specifically requires coverage for remediation not only to an insured’s property, which includes any impact on soil, indoor air, groundwater and surface water, but also to third-party properties. The bill grants the insurance commissioner the authority to enact regulations to implement the requirement and determine coverage amounts, so the parameters of coverage will not be known until the regulatory process concludes.
Insurers are not currently required to provide coverage for underground oil tanks and typically decline coverage for such losses under a pollution exclusion endorsement. Depending on the severity and location of a leak, the costs to remediate property can range from several hundred dollars to several hundred thousand dollars, so this could be a costly requirement for insurers.
The proposed bills do not appear to apply to excess and surplus line carriers.