Today, California Insurance Commissioner Ricardo Lara issued an order requiring all insurance companies doing business in California, “to make an initial premium refund for the months of March and April to all adversely [COVID-19] impacted California policyholders.” (Emphasis added.) The insurers have all been ordered to issue refunds on the following:
- Private passenger automobile insurance
- Commercial automobile insurance
- Workers’ compensation insurance
- Commercial multiple peril insurance
- Commercial liability insurance
- Medical malpractice insurance
- Any other line of coverage where the measures of risk have become substantially overstated as a result of the pandemic.
(The last category no doubt will be the subject of great controversy, as many more lines of coverage arguably fit this definition.)
California consumers should not expect a check in the mail any time soon. This is because the order states “[i]nsurers may comply … by providing a premium credit, reduction, return of premium, or other appropriate premium adjustment.” It also grants each insurer “reasonable flexibility in determining how best to quickly and fairly accomplish” these directives. Nonetheless, within 120 days the insurers have been ordered “to provide each affected policyholder…notification of the amount of the refund, a check, premium credit, reduction, return of premium, or other appropriate premium adjustment.” At the same time, they must give their policyholders “an explanation of the basis for the adjustment” and “offer…the opportunity” to provide their individual actual or estimated experience. For automobile policies, this includes an invitation to provide updated mileage estimates as appropriate.”
It is unclear how the insurance companies will respond. It is conceivable one or more may file lawsuits contesting the constitutionality and/or legal enforceability of the order. It also remains to be seen what measures insurance companies will put in place to comply, and whether they require their policyholders to require proof they suffered COVID-19 “impact.” ECG will continue to monitor the situation as it develops.
Author: David A. Robinson, President and Founding Shareholder, Enterprise Counsel Group