N.J. Bill Would Require Homeowners Insurers to Provide Policy Summary

The New Jersey Assembly’s financial institutions and insurance committee gave approval Monday, Jan. 14, to a recently introduced bill that seeks to make it easier for homeowners to understand what their policy covers and does not cover.

The bill, A3642, would require homeowners insurers to give policyholders a one-page summary of the policy explaining “notable coverages and exclusions under the policy” that are “written in a simple, clear, understandable, and easily readable way.”

What constitutes “notable” coverages or exclusions would be determined by the state’s commissioner of banking and insurance. The copy of the proposed bill can be found at the N.J. Office of Legislative Services website (a PDF file).

Under the proposal, the one-page summary would be added into the homeowners insurance consumer information brochure provided to the policyholder when the policy is purchased or renewed. Under the current law, the homeowners insurance consumer information brochure contains information that explains the insurer’s hurricane deductible program, if any, as well as information on the National Flood Insurance Program.

The bill was introduced to help clear up some confusions reported in the wake of Superstorm Sandy. For example, many homeowners were surprised to find out about some of the exclusions when they filed Sandy claims and that the federal flood insurance from the National Flood Insurance Program is subject to certain limitations, according to a report in The Star-Ledger. The bill was sponsored by Ruben Ramos (D-Hudson), Gary Schaer (D-Bergen and Passaic), Linda Stender (D-Middlesex, Somerset and Union) and Paul Moriarty (D-Camden and Gloucester).

Committee Included Amendments to Assuage Insurers’ Concern

The Assembly’s financial institutions and insurance committee also added a couple of amendments to allay insurers’ concerns before green-lighting the measure. Insurers have expressed concern that the one-page summary might create legal vulnerabilities for insurers in cases involving potential lawsuits.

The committee tried to address that issue by adding an amendment that says the one-page summary shall explicitly state that it is only guidance and not the actual policy.

The amendment is as follows: “The summary shall not be considered a replacement for the terms of the policy of insurance, shall not have the effect of altering the coverage afforded by the policy, and shall not confer new or additional rights beyond those expressly provided for in the policy. The summary shall expressly state that the summary is only provided as guidance to the homeowner in understanding the terms of the policy of insurance.”

The committee also added an amendment that says the department of banking and insurance would decide the timeline for when the insurers would have to start providing the summary. The amendment states: “This act shall take effect on the 90th day following enactment except that the act’s provisions shall not be implemented until the Department of Banking and Insurance, by regulation, issues a timeline for implementation.”