California Business Interruption COVID-19 Coverage Bill: A New Twist To Proposed Legislation

On July 2, 2020, an amended California Assembly Bill 1552 (Bill 1522 or the bill), which relates to commercial business interruption coverage of insured businesses during the ongoing COVID-19 pandemic, was referred to the California Senate Insurance Committee.

Unlike other bills that various state legislatures are considering, this bill would create certain rebuttable presumptions that affect the burden of proof in a first-party coverage case where the insured alleges that business interruption was due to the COVID-19 pandemic and occurred during the California Governor’s state of emergency issued as a result of this pandemic.

Section 2 of Bill 1522 states that it is an “urgency statute necessary for the immediate preservation of the public peace, health, or safety . . . and shall go into immediate effect.”

The necessity for it to go into immediate effect purportedly is in “order to protect the solvency of businesses that were forced to close their doors or limit business” due to the pandemic (although the bill does not explain why insurance is the only, or the proper, vehicle for addressing these solvency issues).

The bill’s provisions would be retroactively applied to all commercial insurance policies providing coverage for business interruption that were in full force and effect on and after March 4, 2020, the date of the declared state of emergency.