Apr 10, 2020
Coronavirus Legal Issues Update -- Executive Order Extending Insurance Premium Grace Periods
Yesterday, Governor Murphy signed Executive Order No. 123 (EO 123), which extends grace periods during which insurance companies, including health insurers, life insurers, and property and casualty insurers, will not be able to cancel policies for nonpayment of premiums.
Minimum Grace Periods
Effectively immediately, under EO 123 a minimum 60-day grace period will be required for health and dental insurance policies. Meanwhile, a minimum 90-day grace period will be required for life insurance, insurance premium-financing arrangements, and property and casualty insurance. This includes auto, homeowners, and renters insurance.
Insurance companies will be required to notify policyholders of the emergency grace periods. They must waive late fees, interest, or any other charges associated with delays in premium payments as directed by the Commissioner of Banking and Insurance. In addition, insurers will be required to provide policyholders with easily readable descriptions of the terms of the extended grace period.
The extended grace periods do not apply to employer-funded health plans, which are exclusively regulated by the federal government and not subject to EO 123.
Claims During the Grace Period
Insurance companies will be required to pay any claim incurred during the emergency grace period that would be covered under the policy. EO 123 prohibits insurance companies from seeking recoupment of any claims paid during the emergency grace period based on non-payment of premiums.
Also effective immediately, EO 123 ensures that policyholders are not required to make a lump sum payment on any unpaid premiums at the close of the grace period. Any unpaid premiums will be amortized over the remainder of the policy term or a period of up to 12 months, as appropriate and as determined by the Commissioner of Banking and Insurance.
Schenck Price will continue to monitor legislative developments at the state, federal and local level, and will provide further updates on future legislative enactments. If you have any questions about the laws referenced in this Alert, please contact the author at firstname.lastname@example.org.
DISCLAIMER: This Alert is designed to keep you aware of recent developments in the law. It is not intended to be legal advice, which can only be given after the attorney understands the facts of a particular matter and the goals of the client.