There is growing evidence that the insurance industry is taking a concerted, joint approach to denying business interruption claims that relate in any way to COVID-19. Even if a business purchased insurance to protect against business interruption, civil authority orders, and other related events, insurance companies are discouraging and/or denying such claims without even reviewing the specific facts or insurance policy language that might be at issue. Unfortunately, insurance brokers and agents—on whom many businesses rely to give them advice in the first instance—are also discouraging claims. California Insurance Commissioner Ricardo Lara issued a directive on April 14, 2020 to address this inappropriate and damaging conduct.
In the attached Notice, Commissioner Lara is requiring that all insurers, insurance agents, brokers, and insurance company representatives must accept business interruption claims and respond to them diligently, thoroughly, fairly, and objectively. As set forth in the notice, “[N]o insurer, insurance agent, broker, insurance company representative . . . shall dissuade policyholders from filing a notice of claim under its Business Interruption insurance coverage, or refuse to open and investigate such claims upon receipt of a notice of claim.”
To the extent that any insurance company or broker fails to properly and strictly adhere to the Commissioner’s notice, businesses should seek relief immediately from the insurance commissioner as well as pursue any and all bad faith remedies that are available. Businesses across the country, particularly small businesses, have been hit extremely hard by shelter-in-place orders and government designations about what is or is not an “essential” business. This has affected onsite operations as well as suppliers and customers and is compounded where employees or others in the vicinity of business properties have tested positive for COVID-19. To the extent your business purchased business interruption insurance, or any other time-element coverage, you should carefully review your policy forms and make a claim if there is any reasonable chance of recovery. Please let us know if we can assist you with conducting such a review, making claims, and responding to insurance company responses to those claims.