On June 29, in a development that could fundamentally change the landscape for businesses in California that have suffered COVID-19 related business outages, two California lawmakers changed pending legislation to address several of the most controversial issues. recovery of insurance for these devastating losses.
The bill, Assembly Bill 1552, focuses on All-Risk real estate insurance. As amended, it would create a "recognizable assumption" that COVID-19 was present on and caused physical damage to property that was the direct cause of business interruption. A similar acceptable assumption would apply to orders to cover the civil authority and to cover intrusion / aggression. The bill would further prohibit COVID-1
While a technical legal concept, the creation of a "reprehensible assumption" can have a dramatic effect on litigation. It instructs the actual tester to assume that something is true while allowing the other side to disprove the fact. This concept is particularly important here because one of the insurers' first arguments is that although COVID-19 is everywhere and has created an international pandemic that kills hundreds of thousands of people, policyholders seeking coverage through scientific evidence must prove that the virus somehow affects their physical integrity. . This process can be expensive and time consuming for the policyholders who have already suffered large losses. Even if an insurer were still entitled to try to refute the presumption of injury and establish that there was none, it would bear the burden of proving it (and the associated cost).
The legislation of a "reprehensible presumption" is a significant departure from bills that have been introduced in other states and provoked an outcry from insurance companies. Legislators in New Jersey and other states ( namely ., Louisiana, Pennsylvania, Ohio, South Carolina and New York) introduced bills that would force coverage with insurance companies that protested, among other things, this would be an incorrect deterioration of contracts . (So far nothing has been adopted.)
But here the agreement would still be enforced as written with the legislator by simply creating a reprehensible assumption as it has done in countless other situations. Nor would it be the first time an acceptable assumption was used in the COVID-19 context – on May 6, California Governor Newsom issued an executive order that created a recognizable assumption in the workers' compensation context, and over a dozen other states have done so. In addition, many other state legislators and courts have routinely established inadmissible assumptions and offsets with respect to other insurance coverage issues. See e.g. N.Y .. Ins. §§ 3420 (c) (2) (A) and (B) (“In all documents where an insurer claims to have been damaged as a result of a failure to notify in time, the burden of proof shall be on: (i) the insurer to prove that it was damaged, if the notice was given within two years after the time required by the insurance, or (ii) the insured, injured person or other claim to prove that the insurer has not been damaged, if the notice was given more than two years after the time required under the insurance … an irrevocable presumption of prejudice shall apply if the insured's liability before the decision has been determined by a competent court or by binding arbitration, or if the insured has settled the claim or action by solution or other compromise. "); Imhof v Nationwide Mutual Ins. Co., 643 So. 3d 617 (Fla. 1994) ("An insurance failure to respond within the 60-day period [outlined in Fla. Stat. 624.155] will create an assumption of bad faith that is sufficient to shift the burden to the insurer to show why it did not respond."); Friedland v. Travelers Indem. Co. 105 P.3d 639, 647 (Colo. 2005) (extending the "notice-prejudice rule", which shifts the burden to the insurer to prove that it was damaged with late notice, to liability insurance cases). The current iteration of the bill can be found here.
The bill was referred to the Senate Insurance Committee on July 2.
We will continue to monitor and keep you informed of developments.