California Insurance Commissioner Issues Notice Requiring Insurance Carriers to Investigate Business Interruption Insurance Claims

April 21, 2020 Published Article

On April 14, 2020, California Insurance Commissioner Ricardo Lara issued a "Notice" to "All admitted and non-admitted insurance companies, all licensed insurance Adjusters and producers, and other licensees and interested parties" concerning the "requirement to accept, forward, acknowledge, and fairly investigate all business interruption insurance claims caused by the COVID-19 pandemic."  The Commissioner found it necessary to issue the Notice "to ensure that all agents, brokers, insurance companies, and other licensees accept, forward, acknowledge, and fairly investigate all business interruption insurance claims submitted by businesses."

Under the Notice, insurance brokers are now required to transmit any oral or written notice of claim immediately to the insurer.  Upon receipt of a notice of claim, subject to certain exceptions, every insurer is required to acknowledge orally or in writing the notice of claim immediately, but in no event more than 15 calendar days after receipt of the notice of claim.  If the acknowledgment is oral, the insurer must keep a written record of the receipt date of the claim notice in the claim file.

Importantly, the Notice requires that "[u]pon receipt of a notice of claim, the insurer is required to provide the policyholder with the necessary forms, instructions, and reasonable assistance, including but not limited to, specifying the information the policyholder must provide in connection with the proof of claim and begin any necessary investigation of the claim."  Each insurer must "conduct and diligently pursue a thorough, fair, and objective investigation of the reported claim" and insurers are prohibited from asking for information not reasonably required for or material to resolve a claim.

Further, "[a]fter conducting a thorough, fair, and objective investigation of the claim," the insurer is to act immediately, but has up to 40 days after receipt of the proof of claim to accept or deny the claim, in whole or in part.  If the insurer denies the claim in whole or in part, it must to communicate the denial in writing to the insured explaining all the legal and factual bases for such denial, including the citation to any applicable statute, law or policy provision, condition or exclusion.

For additional information, you can consult with a Task Force attorney by emailing [email protected] or contacting our office directly at 949-854-7000.