The COVID-19 pandemic continues to bring on unprecedented challenges for California’s businesses and residents. Governor Gavin Newsom’s March 4, 2020 Shelter-in-Place order changed how we all live, travel, and work. An interesting result is that there are less cars on the road, less driving, and the reduced driving has resulted in fewer motor vehicle accidents, injuries, and fatalities on public highways and roads. (Please see UC Davis’ Road Ecology Center’s Special Report (Update): Impact of COVID-19 Mitigation on Numbers and Costs of California Traffic Accidents, April 15, 2020.)
The Consumer Federation of California Education Foundation [CFE] successfully brought this issue before Insurance Commissioner Ricardo Lara in a March 23, 2020 Petition. Commissioner Lara agreed that the overall risk of loss for private passenger automobile insurance is lower due to the pandemic, but also recognized that the reductions in risk extend beyond the automobile line of insurance referenced in the Petition.
Bulletin 2020-3 was issued on April 13, 2020 addressing “Premium Refunds, Credits, and Reductions in Response to COVID-19.” Therein Commissioner Lara ordered insurers to make an initial premium refund for the months of March 2020 and April 2020 to all adversely impacted California policyholders for certain lines of insurance. The insurance policies impacted are:
- 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
Several aspects of the Order are favorable for policy holders:
- The Order required the premium refunds to be made “as quickly as practicable but in no event later than 120 days of the Bulletin;” that is, on or before August 11, 2020.
- Should the COVID-19 pandemic continue beyond May 2020, Commissioner Lara will send out a subsequent Bulletin with appropriate instructions.
- Insurers have options in terms of making the premium refunds: the refund may be done by providing a premium credit, reduction, return of premium, or other appropriate premium adjustment.
- The insurers are required to provide each affected policy holder with a notification and explanation of the basis for the adjustment, including a description of the policy period that was the basis of the premium refund and any changes to the classification or exposure basis of the affected policy holder.
- Insurers are also to provide their plan of how they will be abiding by this Bulletin to the Department of Insurance by June 12, 2020.
Insurance companies have some time to confirm their plans. Information with regard to the calculation of a refund amount and the form of the refund should be forthcoming on or before June 12, 2020. Time will also tell whether Commissioner Lara will need to amend the Order to cover months beyond April 2020 should our lives remain impacted by the COVID-19 pandemic.
Questions
Kronick attorneys across all of the firm’s practice groups – Public Agencies, Natural Resources, Labor & Employment, and Business/Healthcare – will continue to provide clients and the community with ongoing updates and advice regarding COVID-19 related issues as developments warrant. Please feel free to contact us for assistance with issues arising from the current health crisis.