Bill Text: NJ S306 | 2024-2025 | Regular Session | Introduced
Bill Title: Permits municipalities to place lien on fire-damaged property's insurance proceeds in certain instances and requires fire and explosion insurance coverage for certain individuals.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2024-01-09 - Introduced in the Senate, Referred to Senate Commerce Committee [S306 Detail]
Download: New_Jersey-2024-S306-Introduced.html
STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Senator BRIAN P. STACK
District 33 (Hudson)
SYNOPSIS
Permits municipalities to place lien on fire-damaged property's insurance proceeds in certain instances and requires fire and explosion insurance coverage for certain individuals.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning payment of tax liens and withholding of proceeds of fire-damaged properties in certain instances, supplementing P.L.1978, c. 184 (C.17:36-8 et seq.) and amending various parts of the statutory law.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) As used in Sections 3 through 24 of P.L. , c. (C. ) (pending before the Legislature as this bill):
"Enforcement officer" means the elected or appointed officer of any municipality charged by law with the duty to enforce the collection of tax liens on real property.
"Final settlement" means a determination of the amount due and owing to the insured for a loss to insured real property, but does not include contents damage, losses to personal property, or additional coverage not contained in the building coverage portion of the fire insurance policy, which determination is made by any of the following means:
(1) acceptance of a proof of loss by the insurer;
(2) execution of a release by the insured;
(3) acceptance of an arbitration award by both the insured and the insurer; or
(4) judgment of a court of competent jurisdiction,
or as maybe determined by Section 22 of P.L. , c. (C. ) (pending before the Legislature as this bill).
"Governing body" means the legislative body for a municipality.
"Homeowners insurance" means personal lines insurance provided against loss to real and personal property as defined in the standard fire policy and extended coverage endorsement thereon, a dwelling policy, the homeowners multiple peril policy, insurance against the perils of vandalism, malicious mischief, burglary, or theft, or liability insurance or any combination thereof, or any other such policy delivered, issued, or renewed or approved by the commissioner for issuance, delivery, or renewal in this State.
"Municipality" means a municipal corporation having the power to enforce the collection of taxes, special ad valorem levies, special assessments or other charges imposed upon real property by or on behalf of a municipal corporation.
"Real property" means property upon which there is erected any residential, commercial or industrial building or structure except an owner-occupied single family residential structure and owner-occupied two family residential structures.
"Residential property" means property on which home insurance can be issued.
"Total Loss" means: (1) a determination by a construction code official, or insurance company that is accepted by the municipality, as provided for by ordinance adopted by Section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill), that either: (a) there is an actual and immediate danger of collapse of failure of a building or structure which would endanger life that requires demolition of fire affected property to eliminate any actual and immediate danger to human life; or (b) that a fire damaged structure is in such a condition as to make it dangerous to the health and safety of the persons on or near the premises, such as to require the demolition of the fire damaged property; or (2) where the fire damaged property was demolished as the result of a governmental order; and the amount of insurance available is not sufficient to restore the building or structure to a safe condition in accordance with N.J.A.C. 5:23-6, the Rehabilitation Subcode, as may be amended.
2. Section 2 of P.L.1978, c.184 (C.17:36-9) is amended to read as follows:
2. Any municipality may, by ordinance, prohibit the payment to a claimant by any insurance company of any claim in excess of $2,500.00 for fire damages on any real property located within the municipality, pursuant to any fire insurance policy issued or renewed after the adoption of such ordinance and after the filing of such ordinance with the [State Commissioner of Insurance] Commissioner of Banking and Insurance, until such time as: a. (1) anticipated demolition costs and all taxes and assessments and all other municipal liens or charges due and payable, appearing on the official certificate of search; or (2) all taxes and assessments and all other municipal liens or charges due and payable, appearing on the official certificate of search, shall have been paid either by the owner of such real property or by the insurance company pursuant to the provisions of section 3 of [this act] P.L.1978, c.184 (C.17:36-10); or (3) the lien created by operation of sections 3 and 4 of P.L. , c. (C. ) (pending before the Legislature as this bill) are released or otherwise discharged or satisfied, and b. the municipality submits to the insurance company a copy of a resolution adopted pursuant to section 4 of [this act] P.L.1978, c.184 (C.17:36-11). No change in such an ordinance shall take effect until filed with the commissioner.
The [State Commissioner of Insurance] Commissioner of Banking and Insurance shall cause to have published in the New Jersey Register a list of all municipalities which have adopted ordinances pursuant to paragraph (1) or (2) of subsection a. of this section and said list shall designate by asterisk those municipalities which have adopted said ordinances since the previous date of publication of said list.
The official certificate of search may, from time to time, be altered, by the bonded official responsible for preparing such certificates, in order to correct any errors or omissions or to add any municipal liens or related charges due and payable subsequent to the preparation of the official certificate.
(cf: P.L.1985, c.519, s.2)
3 (New section) a. Every municipality is hereby authorized to enact an ordinance empowering it to claim against the proceeds of a policy of fire insurance or homeowners insurance insuring the interest of an owner and issued on real property situated within such municipality covering residential property and also other real property as may be designated in the ordinance. Upon passage of such an ordinance, in addition to other liens that may arise under P.L. , c. (C. ) (pending before the Legislature as this bill), the receipt by an insurance company of a claim under a homeowners or fire insurance policy for a loss to real property covered by the ordinance located within the municipality that is caused by fire or explosion creates a statutory lien up to the amount of coverage available for damages caused by fire or explosion, including any coverage for debris removal in favor of the municipality in which the property is situated for the purpose of effectuating the restoration of the fire damaged property, including the securing, repairing, replacing, removing, or demolition the property or any portion thereof as may be required, which shall, as to such coverage amount, be prior to all other liens and claims except the claim of a mortgagee of record named in the policy; provided, that the amount of the lien may not exceed the policy limits of coverage for the real property plus debris removal, if any and further; provided, however, that the lien created by this subsection does not apply to proceeds payable under the policy for any losses other than those to the real property insured, including loss of personal property and payments for temporary housing and related living expenses. Payment of any proceeds subject to the lien shall be withheld by the insurer, notwithstanding the provisions of section 1 of P.L.1978, c.184 (C.17:36-8). The lien shall be separate and apart from other liens and encumbrances which may arise under P.L.1978, c. 184.
b. Unless earlier released by a municipality as provided for in an ordinance adopted pursuant to this section, any such lien that arises shall expire if the municipality determines that the fire resulted in a total loss, or the municipality fails to provide notice as provided for in section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill), within: (1) 90 days of a fire or explosion; or (2) within 45 days of receipt of notice that an insurer or insured will assert that the fire resulted in a total loss or of the insurer or insured providing notice of a final settlement, whichever is later. The enforcing officer, utilizing such procedure as may be provided for by ordinance, may determine to accept or deny an insurer or insured's determination as to the estimated cost to restore fire damaged property or assertion that the fire or explosion resulted in a total loss.
c. If not determined to be a total loss, the ordinance shall provide authority for the enforcing officer to communicate with the construction code official as to the estimated cost that would be required to restore the fire damaged property and provide procedures for an insurer or insured to challenge either such estimate determination, or a determination that a fire has not resulted in a total loss or a cost estimate that exceeds amount the final settlement. Appeal of final municipal determinations in either regard are to be brought in the Superior Court Law Division, as defined in the ordinance, within 45 days of such determination. Despite the pendency of any challenge to or appeal of such determination, including to the Superior Court Law Division, the enforcing officer may file the notice of lien as provided section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill) for such amount as the enforcing officer has determined is the estimated cost to restore the fire damaged property.
4. (New section) Upon the adoption of an ordinance by the governing body of a municipality permitting such notices of lien to be filed, the enforcing officer of the municipality shall cause a notice of intention to claim a lien, and the amount of the lien claimed by the municipality, against proceeds to be served upon the Commissioner of Banking and Insurance for entry in the index of municipalities maintained by the commissioner as provided in section 2 of P.L.1978, c.184 (C.17:36-9). Thereafter, the enforcing officer shall render to any insurer a certificate containing the information required by such ordinance, which shall also be filed with the municipal clerk of the municipality in which the fire damaged property is located, and the amounts stated in the certificate shall be a lien on the proceeds of the insurance policy until paid or otherwise discharged as provided for pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill) or ordinance adopted pursuant thereto. The lien so filed shall expire: (a) upon completion of the restoration of the fire damaged property as defined by ordinance upon the production of an official certificate and on a form prescribed and certified by the municipality stating that further restoration is not required or that the cost of restoration of the fire damaged property has been paid; or (b) as provided for in section 14 of P.L. , c. (C. ) (pending before the Legislature as this bill).
5. (New section) No ordinance adopted pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be effective unless the ordinance provides for the release or return to the insured of any amounts subject to a lien to which it would otherwise be entitled to claim provided that the insured, including a new property owner, agrees with the municipality in writing to, within four months or 120 days, restore the fire damaged property to the same or improved condition that it was in prior to the fire or explosion, subject to any conditions the ordinance provides to guarantee the performance of the obligation including, but not limited to, an agreement to deposit proceeds in an escrow account or the provision of a performance bond or other adequate guarantee as may be provided by an ordinance adopted pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill).
7. (New section) Sections 3 through 24 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not be deemed or construed to alter or impair the right of a municipality to acquire or enforce any lien against real property, or otherwise undertake, order, arrange for or otherwise act to effectuate the restoration of the fire damaged property, but shall be in addition to any other power provided by law to acquire or enforce any such right.
8. (New section) If a lawsuit or arbitration is filed for a loss to the insured real property due to fire or explosion, notice of the lawsuit or arbitration shall be provided to the municipality, and the enforcing officer and construction code official shall each be entitled to intervene in such proceeding as of right.
9. (New section) If the insured, including a new property owner, fails to agree with the municipality in writing to, within four months or 120 days, restore the fire damaged property to the same or improved condition that it was in prior to the damage caused by fire or explosion, or provide the guarantees set forth in section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill) or ordinance adopted pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill) a municipality may escrow the amount withheld by the insurer, and to retain that amount. For a municipality to escrow the amount withheld by the insurer, and to retain that amount, the following procedure shall be used:
a. an authorized representative of the municipality may request that the insurer pay the withheld amount into an escrow account maintained by the municipality, that may be applied towards payment of any required securing, repair, replacement, removal, or demolition of the damaged property.
b. a request under subsection a. of this section shall be sent to the insurer with a copy to the insured and any mortgagees. The copy to the insured shall contain the notice required under subsection d. of this section. On receipt of the request, the insurer shall forward the withheld amount to the financial officer of the municipality and shall provide notice of the forwarding to the insured and any mortgagees;
c. for a judgment, the request under subsection a. of this section shall be sent to the insurer with a copy to the insured, any mortgagees, and the court in which judgment was entered. The copy to the insured shall contain the notice required under subsection d. of this section. On motion of the municipality, the court shall order the withheld amount transmitted to the financial officer of the municipality; and
d. the municipality shall notify the insured that the insured has 10 days from the date of the mailing of the notice to object to the municipality's retention of the withheld amount. The notice shall identify the authorized representative of the municipality to whom the insured should address any objections and shall state that the insured may do either of the following:
(1) seek resolution with the representative of the municipality designated to receive and resolve objections under this section. The municipality shall make a final determination and shall notify the insured of that determination not later than 30 days after receipt of notice that the insured wishes to seek resolution under this paragraph. This final determination shall include notice to the insured that if the insured is still dissatisfied with the municipality' determination, the insured may seek relief in in the Superior Court Law Division; or
(2) seek relief in the Superior Court Law Division.
10. (New section) Upon receipt of money and information from an insurer as prescribed in section 9 of P.L. , c. (C. ) (pending before the Legislature as this bill), the financial officer of the municipality shall record the information and the date of receipt of the money and shall immediately deposit the money in a trust or escrow account established for the purposes of this section. The account may be interest-bearing.
11. (New section) Except as provided in this section, money deposited in an account pursuant to section 10 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not be commingled with municipal funds. Any interest earned on money placed in a trust or escrow account may be retained by municipality to defray administrative costs incurred under this section.
12. (New section) Except as provided in subsection c. of this section, the balance of the money deposited under section 10 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall immediately be forwarded to the insured when the authorized representative of the municipality designated by the governing body of the municipality receives or is shown reasonable proof of any of the following:
a. that the damaged or destroyed portions of the insured structure have been repaired or replaced, except to the extent that the amount withheld under this section is needed to complete repair or replacement;
b. that the damaged or destroyed structure and all remnants of the structure have been removed from the land on which the structure or the remnants of the structure were situated, in compliance with the local code requirements of the municipality in which the structure was located;
c. that the insured has entered into a contract to perform securing, repair, replacement, removal, or demolition services for the insured real property and that the insured consents to payment of money directly to the contractor performing the services upon completion. Money released under this section may be forwarded only to a contractor performing services on the insured property; and
d. that the insurer, insured, or owner of the property and the governing body of the municipality have entered into an agreement calling for the release of funds if the governing body determines that the funds are to be used or are not necessary to restore or improve the fire damaged property.
13. (New section) Reasonable proof required pursuant to section 12 of P.L. , c. (C. ) (pending before the Legislature as this bill) includes any of the following:
a. originals or copies of pertinent verifiable contracts, invoices, receipts, and other similar papers evidencing both the work performed or to be performed and the materials used or to be used by all contractors performing securing, repair, replacement, removal, or demolition services for the insured real property, other than a contractor subject to subsection b. of this section;
b. an affidavit executed by the contractor that has performed the greatest amount of repair or replacement work on the structure, or that has done most of the clearing and removal work if structure repair or replacement is not to be performed. The contractor shall attach to the affidavit all pertinent contracts, invoices, and receipts and shall swear that these attached papers correctly indicate the nature and extent of the work performed to date by the contractor and the materials used;
c. an inspection of the insured real property to verify that the securing, repair, replacement, removal, or demolition of the damaged property has been completed pursuant to section 12 of P.L. , c. (C. ) (pending before the Legislature as this bill); or
d. other reasonable proof as provided for by an ordinance adopted pursuant to this section.
14. (New section) Except as otherwise provided in P.L. , c. (C. ) (pending before the Legislature as this bill), if with respect to a loss, reasonable proof is not received by or shown to an authorized representative of the municipality designated by the governing body of the municipality within 120 days after the policy proceeds portion was received by the financial officer of the municipality, the municipality may use the retained proceeds to undertake, arrange for or otherwise act to secure, repair, or demolish all or part of the structure and property to comply with local code requirements and applicable ordinances of the municipality. The municipality may extend the 120-day time period under this section. The municipality shall return to the insured any unused portion of the retained proceeds and the lien shall otherwise be released if a municipality has not acted to commence to secure, repair, or demolish all or part of a structure or property that suffered a loss, within two years of the municipalities receipt of policy proceeds, pursuant to Section 9 of P.L. , c. (C. ) (pending before the Legislature as this bill), and the municipality shall release and transmit such funds to the insured. The insured may file a civil action against municipality for the return of the policy proceeds. An action filed under this section shall be filed within three years of the municipalities receipt of the proceeds from the insurer.
15. (New section) Except as otherwise provided in P.L. , c. (C. ) (pending before the Legislature as this bill), there is no liability on the part of an insurer or an agent or employee of a municipality or an insurer, and a cause of action shall not arise against a municipality, for withholding, transferring or utilizing insurance proceeds in the course of complying or attempting to comply with P.L. , c. (C. ) (pending before the Legislature as this bill). If there is a dispute concerning the assertion of a lien or the distribution or use of an amount withheld from payment under P.L. , c. (C. ) (pending before the Legislature as this bill), the insurer or municipality may file an action in the Superior Court Law Division to identify all parties that may have a financial interest in the withheld amount and to determine how the withheld amount should be distributed. Notwithstanding any other provision of P.L. , c. (C. ) (pending before the Legislature as this bill), upon the filing of such an action, any amount withheld by an insurer shall continue to be withheld, except as may be transferred to a municipality under section 9 of P.L. , c. (C. ) (pending before the Legislature as this bill), or as otherwise directed by the court in which such action is pending.
16. (New section) Sections 3 through 24 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall apply only to property located in a municipality where the municipality pursuant to an ordinance by its governing body notifies the Commissioner of Banking and Insurance in writing that the municipality has established a trust or escrow account to be used as prescribed in P.L. , c. (C. ) (pending before the Legislature as this bill) and intends to uniformly apply P.L. , c. (C. ) (pending before the Legislature as this bill) with respect to all property located within the municipality following written notification to the Commissioner of Banking and Insurance. The commissioner shall prepare and distribute a list of all municipalities that have elected to apply this section to all insurance companies transacting property insurance in this State.
17. (New section) A municipality may apply to be added to the list prepared pursuant to section 16 of P.L. , c. (C. ) (pending before the Legislature as this bill) by making a written request for addition to the Commissioner of Banking and Insurance. When a written request for addition from a municipality has been received by the Commissioner of Banking and Insurance, an amended list shall be prepared and distributed indicating the addition. The addition is effective on the date specified by the Commissioner of Banking and Insurance in the amendment. The Commissioner of Banking and Insurance shall notify the municipality and insurance companies of the effective date of the addition which shall be effective not less than 30 days after receipt of notice by the insurance company. A municipality shall not apply Sections 3 through 24 of P.L. , c. (C. ) (pending before the Legislature as this bill) to any loss that occurred before the effective date of the addition.
18. (New section) A municipality may request to be deleted from the list prepared pursuant to section 16 of P.L. , c. (C. ) (pending before the Legislature as this bill) or may cease to apply this section for a period of not less than six months upon not less than 30 days' written notice to the Commissioner of Banking and Insurance. After receipt of a request to be deleted from the list, the Commissioner of Banking and Insurance shall prepare and distribute an amendment to the list indicating the deletion. The deletion is effective on the date specified by the Commissioner of Banking and Insurance in the amendment. The Commissioner of Banking and Insurance shall notify the municipality and insurance companies of the effective date of the deletion which shall be effective not less than 30 days after receipt of the notice by the insurance company. A municipality shall continue to apply this section to any loss that occurred before the effective date of the deletion, notwithstanding the deletion.
19. (New section) Sections 3 through 24 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall apply to insured real property located in a municipality that has elected to apply sections 20 or 21 of P.L. , c. (C. ) (pending before the Legislature as this bill).
20. (New section) Where a total loss has not been determined to occur by the municipality or court of competent jurisdiction, the insurer shall withhold demolition and debris removal costs and shall pay and otherwise withhold such amount in accordance with Sections 3 through 24 of P.L. , c. (C. ) (pending before the Legislature as this bill).
21. (New section) Sections 3 through 24 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall apply only to claims or proofs of loss that exceed 10 percent of the insurance on the insured real property available for damages caused by fire or explosion.
22. (New section) Unless otherwise provided by law, within 14 days after an insurer receives a claim or proof-of-loss related to a fire or explosion, whichever is earlier, the insurer shall provide the municipality with a statement as to amounts of coverage available to the insured and shall begin an investigation as is reasonably necessary unless the failure to begin the investigation is caused by factors beyond the control of the insurer which reasonably prevent the commencement of the investigation. If an investigation involves a physical inspection of the property, an insurer shall conduct the physical inspection within 35 days after its receipt of the claim or proof-of-loss statements, whichever is earlier. Failure to timely conduct an inspection shall constitute a deemed final settlement of the claim for purposes of P.L. , c. (C. ) (pending before the Legislature as this bill) in the entire amount of coverage available for damages caused by fire or explosion under a policy, unless the failure to begin the investigation is caused by factors beyond the control of the insurer which reasonably prevent the commencement of the investigation, and such entire amount of coverage shall be subject to the lien provided in this section, and shall be available to the insured or the municipality to undertake the securing, repairing, replacing, removing, or demolition of the fire damaged property or any portion thereof as provided for in Sections 3 through 24 of P.L. , c. (C. ) (pending before the Legislature as this bill).
23. (New section) If an insurer withholds payment under a policy in good faith because of suspected arson, fraud, or other question concerning coverage, this section shall not apply until the issue or question is resolved and final settlement is made.
24. (New section) All actions authorized by Sections 3 through 24 of P.L. , c. (C. ) (pending before the Legislature as this bill) are to be brought in front of the Superior Court Law Division and shall be by summary action.
25. Section 1 of P.L.2022, c.92 (C.40:10A-1) is amended to read as follows:
1. a. Except as provided in subsection b. of this section, the owner of a business or the owner of a rental unit or units shall maintain liability insurance for negligent acts and omissions and damage caused by fire or explosion in an amount of no less than $500,000 for combined property damage and bodily injury to or death of one or more persons in any one accident or occurrence.
b. The owner of a multifamily home which is four or fewer units, one of which is owner-occupied, shall maintain liability insurance for negligent acts and omissions and damage caused by fire or explosion in an amount of no less than $300,000 for combined property damage and bodily injury to or death of one or more persons in any one accident or occurrence.
(cf: P.L.2022, c.92, s.1)
26. This act shall take effect on the 180th day next following enactment.
STATEMENT
This bill permits a municipality to place a lien on a fire-damaged property's insurance proceeds in certain instances and requires fire and explosion insurance coverage for certain individuals.
Under the bill, a municipality will be allowed to place a lien on a fire-damaged property's insurance proceeds. A municipality that adopts an ordinance allowing these liens to be placed will be required to ensure that the ordinance provides for the release or return to the insured any amounts to which the insured would otherwise be entitled to claim, provided that the insured agrees with the municipality in writing to restore the fire damaged property to the same or improved condition that the premises was prior to the damage within four months or 120 days. Municipalities that adopt an ordinance to allow the municipality to place a lien on a fire-damage property's insurance proceeds must include a procedure within the ordinance to withhold payment by the insurer of the proceeds. The bill additionally provides that, for municipalities who adopt the ordinance, if reasonable proof that the damaged or destroyed portions of the insured structure is not received by or shown to an authorized representative of the municipality within 120 days after the policy proceeds was received by the municipality, the municipality may retain and use the policy proceeds to secure, repair, or demolish the structure and property to comply with local code requirements and applicable ordinances of the municipality.
The bill also provides that the owner of a business or owner of a rental unit or units will be required to maintain liability insurance for damage cause by fire or explosion in an amount that is no less than $500,000 for combined property damage and bodily injury to or death of one or more person in any one accident or occurrence. Owners of a multifamily home that is four or fewer units, one of which is owner-occupied, shall also maintain similar liability insurance for damage caused by a fire or explosion in an amount that is no less than $300,000 for combined property damage and bodily injury to or death of one or more person in any one accident or occurrence.
