Attention Insurers: CDI Orders Mandatory Call for Business Interruption Coverage Information in the Wake of COVID-19

In response to the evolving situation presented by the coronavirus pandemic, California Insurance Commissioner Ricardo Lara has circulated a notice to all admitted insurance companies in California, as well as non-admitted carriers doing business in the state, requesting information about business interruption and related coverage. More specifically, the CDI has issued an urgent data survey to better understand the number and scope of business interruption insurance coverages in effect in California and to approximate the number of those policies that exclude viruses such as COVID-19.

In light of this mandatory call, and in an attempt to ease concerns and streamline the data collection process for similar insurance department directives, Ray Farmer, President of the National Association of Insurance Commissioners (NAIC) has assembled a team of state regulators to work with NAIC staff to design a common template that covers (1) insurer operational readiness, (2) relevant financial market impact, and (3) policy coverage matters. Mr. Farmer had urged state regulators (the CDI included) to refrain from commencing data calls until the template is circulated on April 1, 2020 (an anticipated date)—this in order to lessen the burden on responding carriers and also streamline the number of responses that state insurance departments would need to manage.

It is not entirely clear how Commissioner Lara’s position regarding his notice meshes with the NAIC’s call for uniformity when it comes to data requests made by state insurance departments. In an attempt to gain some clarity on the issue, Michelman & Robinson reached out to senior staff members at the CDI and learned that Commissioner Lara’s data call was developed prior to the NAIC’s request, and that once the NAIC template is issued, the CDI will coordinate going forward. In the meantime, for insurance companies (admitted or otherwise) in California, the following Q&A serves to break down Commissioner Lara’s directive in its current form.

Q. What exact information must qualifying insurers provide to the CDI, and when must it be submitted?

A. According to the notice, insurers (again, those that are admitted in California, along with non-admitted carriers doing business in the state) should, to the extent available, provide the following data regarding business interruption-related insurance matters to the CDI no later than April 9, 2020:

  • The volume of (1) business interruption coverage, (2) civil authority coverage, (3) contingent business coverage, and (4) supply chain coverage written and that has not lapsed as of March 26, 2020. This information is to be expressed in policy types and numbers of policies written of each type. For the four types of coverage identified, insurers are asked to provide information on the following questions:
    • How many policies are covered under each coverage identified above?
    • Out of these policies, how many fall under businesses with more than 500 employees, or alternatively, meet your definition of a large business?
    • Out of these policies, how many fall under business with less than 500 employees, or alternatively, meet your definition of a medium-sized business?
    • Out of those policies covering businesses with less than 500 employees, how many fall under businesses with less than 100 employees, or alternatively, meet your definition of a small business?

Q. Will any mechanism be made available by the CDI to more easily present the requested data?

A. Commissioner Lara has advised that a Microsoft Excel workbook will be sent to carriers in an upcoming communication containing submission instructions. All of the foregoing information is to be entered into the workbook and sent to the CDI no later than April 9.

Q. Given the scope of information being requested, and the requirement to present them in an Excel workbook, questions may arise. Where should qualifying insurers direct inquiries?

A. Questions about the directive should be asked via email and sent to [email protected].

Q. What has been the reaction to the CDI’s request for data?

A. Carriers, at least some of them, have not been very happy. Comments from David A. Sampson, president and CEO of the American Property Casualty Insurance Association (“APCIA”), provide a glimpse into the mindset of many an insurance company, “the less time insurers have to spend on responding to regulators seeking information, the more likely they will be able to focus on customers.”

There is no doubt that the COVID-19 pandemic is dragging insurance companies into uncharted waters. Which is why Mr. Sampson recently stressed that the more coordinated these data calls are to make them “uniform, limited in scope, and reasonable in timing, the more insurers will be able to focus on customer service obligations.”

Q. Is there any other information about the coverage information subject to the data call or anything else about Commissioner Lara’s mandate that insurers should know about?

A. Yes, along with the notice, the CDI distributed an FAQ on business interruption insurance and other issues affecting California small businesses that may be of interest to insurers required to provide related data. Also, carriers may be interested to know that similar mandatory data requests relating to business continuation and business interruption coverage have also been issued in New York and Florida.

M&R will continue to monitor developments out of the CDI, APCIA and NAIC.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.