New Bill Proposes Business Interruption Coverage for COVID Closures

On February 16, Assemblyman James Ramos (D-Highland) introduced Assembly Bill 743. It would add Chapter 12 (commencing with Section 10109) to Part 1 of Division 2 of the Insurance Code. The bill also contains an urgency clause, so the measure would go into immediate effect once the Governor signs it.

AB 743 would create Chapter 12, which would be titled “Coverage for COVID-19.” It would provide that, with respect to a policy of insurance that provides coverage for business interruption, there would be several rebuttable presumptions affecting the burden of proof that would apply in a case in which the insured alleges that the business interruption was due to the coronavirus 2019 (COVID-19) pandemic and occurred during the period of the state of emergency declared by the Governor due to the COVID-19 pandemic:

• With respect to coverage for general business interruption and extra expenses, a rebuttable presumption applies that COVID-19 was present on the insured’s property and caused physical loss or damage to that property which was the direct cause of the business interruption.

• With respect to coverage for business interruption due to an order of civil authority, a rebuttable presumption applies that COVID-19 was present on property located within the geographical location covered by the order of civil authority and caused physical loss or damage to that property which was the direct cause of the insured’s business interruption.

• With respect to coverage for business interruption due to impairment of ingress and egress, a rebuttable presumption applies that COVID-19 was present on the property of a third party and caused physical loss or damage to that property which was the direct cause that prevented the ingress and egress to the insured’s property and resulted in the insured’s business interruption.

In addition, AB 743 would provide that this law would be retroactively applied to all insurance policies that provide coverage for business interruption that were in full force and effect on and after March 4, 2020, the date the Governor declared a state of emergency related to the COVID-19 pandemic.

The bill would take effect immediately as an urgency statute. The bill specifies that it should take effect immediately in order to protect the solvency of businesses that were forced to close their doors or limit business due to the coronavirus disease 2019 (COVID-19) pandemic. The bill is expected to be heard in policy committee in March.