The State of New Jersey is working to lessen the financial impact of COVID-19 on residents and businesses struggling to pay their bills. On April 9, 2020, Governor Murphy issued Exec. Order No. 123 __ N.J.R __ (“EO 123”).  EO 123 directed insurance premium finance companies to refrain from cancelling any policy or contract for nonpayment for a period of time as directed by the Commissioner of the Department of Banking and Insurance (“Commissioner”), to exercise appropriate forbearances on collection documentation, amortizing any unpaid payments over the remainder of the policy term or a period of up to 12 months, as appropriate, as directed by the Commissioner, and to refrain from seeking recoupment of paid claims during the emergency grace period. On April 10, 2020, the Department of Banking and Insurance (“Department”) issued Bulletin No. 20-17.  Among other things, Bulletin No. 20-17 directs all insurance premium finance companies licensed pursuant to N.J.S.A. 17:16D-1 to -16 (“Insurance Premium Finance Company Act”) to:

• extend a 90-day grace period for the payment of premiums to their clients;
• waive late payment fees, finance charges, and delinquency charges otherwise due, and not report late payments to credit rating agencies, during the 90-day period;
• allow premiums due but not paid during the 90-day period to be paid over either 12 months or the remainder of the current policy term, whichever is longer, except that a premium finance company may provide a longer repayment period; and
• ensure that late payments during the 90-day period are not considered in any future premium calculations at any time.

Does Bulletin No. 20-17 apply to premium finance agreements entered into after March 1, 2020?
Bulletin No. 20-17 is not intended to govern new insurance premium finance agreements entered into on or after March 1, 2020.  Bulletin No. 20-17 covers insurance premium finance arrangements entered into and effective prior to March 1, 2020. 

Does Bulletin No. 20-17 require an insured to “opt in” to obtain the relief afforded in the Bulletin, for example, by stating that the borrower (i) is experiencing financial hardship due to COVID-19 and (ii) was in good standing under its insurance premium finance loan on March 1, 2020?
Yes, Bulletin No. 20-17 requires an insured to “opt in” to obtain the relief afforded in the Bulletin.  That opt-in can be effected by the borrower stating that they are (i) experiencing financial hardship due to COVID-19 and (ii) in the case of an insurance policy with a related insurance premium financing arrangement, on March 1, 2020 were in good standing under the terms and conditions of the related insurance premium financing agreement.  Note that the Department will be monitoring the practices and procedures of insurance premium finance companies in implementing the grace periods and other requirements of Bulletin No. 20-17, and will take enforcement actions where appropriate. (including license termination actions) .

Regarding the statement in Bulletin No. 20-17 that “[t]he extended grace periods described above shall apply to policyholders that were in good standing with their insurance carrier on March 1, 2020,” was the reference to “insurance carrier” intended to be “premium finance company”?
Yes.  The phrase in the first sentence of the third paragraph on page 2 of the Bulletin requiring policyholders to be in good standing “with their insurance carrier” should be read as “under the terms and conditions of their insurance premium financing agreement”. 

What happens if the insured/borrower fails to make the installment payment to the insurance premium finance company after the grace period mandated by Bulletin No. 20-17?
If an insured/borrower fails to make the first installment payment due after the expiration of the applicable emergency grace period provided by EO 123 and Bulletin No. 20-17, and the insurance premium finance company cancels the financed insurance policy in accordance with the terms of the premium finance agreement and applicable law, the insurance carrier must return to the insurance premium finance company the gross unearned premiums due under the insurance contract calculated as of 90 days prior to the effective date of cancellation set forth on the premium finance company’s notice of cancellation.  The insurance policy must remain in force during the grace period and the insurer must continue to pay claims during this time.