Extended "Emergency Grace Periods" for Non-Payment of Insurance Premiums

Extended "Emergency Grace Periods" for Non-Payment of Insurance Premiums

April 9, 2020

On April 9, 2020, Governor Murphy signed an executive order (EO 123) that provides extended “emergency grace periods” for insureds to pay their insurance premiums before their policies can be canceled for non-payment. A copy of EO 123 is available here.

EO 123 provides that property and casualty insurance companies, life insurance companies, and insurance premium finance companies shall not cancel any policy or contract as a result of nonpayment for a period of at least 90 days, during which period claims shall be paid without regard to prior nonpayment of premium by the policyholder.

EO 123 further provides that health insurance companies, health maintenance organizations, health service corporations and other entities issuing health or dental benefits plans in New Jersey shall not cancel any policy or contract as a result of nonpayment for a period of at least 60 days, during which period claims shall be paid without regard to prior nonpayment of premium by the policyholder and the cost of which claim may not be recouped during or after the emergency grace period from the policyholder based upon the nonpayment of the premium.

Significantly, the order provides that the insurer may not demand collection of the entire portion of the unpaid premium at the end of the emergency grace period, but must instead amortize the insured’s unpaid premium over a period of time to be determined by the Commissioner of Banking and Insurance.

EO 123 takes effect immediately and it is anticipated that the Commissioner of Banking and Insurance will take steps to effectuate the order.