“My broker told me….” is a common start to almost every caller who has contacted Merlin Law Group’s California office regarding a potential claim for business interruption damages due to the COVID-19 pandemic. California was the first state to issue a stay-at-home order on March 19, 2020, under Governor Newsom’s Executive Order N-33-20. On that date, many non-essential businesses were forced to temporarily stop operations with the goal of limiting the spread of the novel-coronavirus and ensure healthcare systems were not overwhelmed.

Many business owners contacted their brokers who told them they lacked pandemic coverage or that their claim would be denied without even reading the policy (RTFP!). Now, almost a month later, the political climate has changed, and Chip Merlin’s general advice has been to instruct these business owners to report their loss in writing, just in case there is a legislative change – or better – their broker’s initial assessment was wrong.

Claims continued to be made, and on April 14, 2020, California’s Insurance Commissioner Ricardo Lara issued an official Notice and press release reminding insurance companies they still have the obligation to conduct a full, fair, prompt and thorough investigation of all the bases of a claim before making a coverage decision. What’s more, the Notice reminds agents and brokers that they have an obligation to forward and acknowledge these claims to carriers.

The Notice is a good reminder to insurers and those representing insurance companies that each of these claims is unique and fact intensive. Insurance adjusters should be asking policyholders questions with the goal of finding coverage for a loss, not denying claims based on insufficient information, speculation or biased information. Given the magnitude of the situation, Commissioner Lara felt it was a good time to remind carriers and agents of these obligations.