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Update: California Legislation to Include “Rebuttable Presumptions” Supporting COVID-19 Business Interruption Coverage

July 27, 2020

Authors: Paul S. White, Siobhán A. Breen

On June 29, 2020, the California Legislature amended California Assembly Bill 1552 (AB 1552) to address purported insurance recovery for COVID-19 losses. Pursuant to the language of AB 1552, the bill was designed to "protect the solvency of businesses that were forced to close their doors or limit business" due to the COVID-19 pandemic.

As amended, AB 1552 would create three rebuttable presumptions affecting the burden of proof in a case in which the insured alleges that its business was interrupted due to the COVID-19 pandemic:

  • First, with respect to coverage for general business interruption and extra expenses, AB 1552 would create a rebuttable presumption that "COVID-19 was present on the insured's property and caused physical damage to that property, which was the direct cause of the business interruption."
  • Second, with respect to coverage for business interruption due to an order of civil authority, AB 1552 would create a rebuttable presumption that "COVID-19 was present on property located within the geographical location covered by the order of civil authority and caused physical damage to that property, which was the direct cause of the insured's business interruption."
  • Third, with respect to coverage for business interruption due to impairment of ingress or egress, AB 1552 would create a rebuttable presumption that "COVID-19 was present on the property of a third party and caused physical 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."

Further, AB 1552 would "prohibit COVID-19 from being construed as a pollutant or contaminant for purposes of any exclusion within a commercial insurance policy unless viruses are expressly included in that exclusion policy language."

If enacted, AB 1552 would take "immediate effect" and apply retroactively to all commercial insurance policies providing coverage for business interruption that were in force and effect on and after March 4, 2020, which is the date that California Governor Newsom declared a state of emergency related to the COVID-19 pandemic.

Read details of bills from other states:

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