California Department of Insurance Issues Alert for Insurers to Accept, Forward, Acknowledge, and Fairly Investigate All Business Interruption Insurance Claims

On April 14, 2020, the California Department of Insurance (by Insurance Commissioner Ricardo Lara) issued an Alert in reference to the COVID-19 pandemic, specifically to all admitted and non-admitted insurance companies, all licensed insurance adjusters and producers, and other licensees and interested parties entitled “Requirement to Accept, Forward, Acknowledge, and Fairly Investigate All Business Interruption Insurance Claims Caused by the COVID-19 Pandemic.” You can find the Alert at the following link:

You might be aware that possible insurance recovery by businesses for losses arising from COVID-19 already is a heavily discussed legal topic in the context of business interruption and other possible insurance policies and coverages. Each business should be evaluating each of its policies, not just its business interruption policy, for possible coverage. Such a discussion and evaluation requires specific policy analysis which is beyond the scope of this post or of any one post. Each insurance policy and its coverage, exclusions, etc., must be read and evaluated separately including such matters as the applicable jurisdiction and laws, not just the wording of the policy but also the intent of the policy and the parties, contract and insurance policy legal interpretation, presumptions, burden of proof, etc.

The Alert is also interesting for its citations to the California Code of Regulations at Sections 2695.5 and 2695.7, and requirements pertaining to the acceptance, forwarding, acknowledgement, and fair investigation, acceptance, or denial as those Sections apply to all insurance policies and claims. For example, in part, Section 2695.7(b) requires:

(b) Upon receiving proof of claim, every insurer, except as specified in subsection 2695.7(b)(4) below, shall immediately, but in no event more than forty (40) calendar days later, accept or deny the claim, in whole or in part. The amounts accepted or denied shall be clearly documented in the claim file unless the claim has been denied in its entirety.

(1) Where an insurer denies or rejects a first party claim, in whole or in part, it shall do so in writing and shall provide to the claimant a statement listing all bases for such rejection or denial and the factual and legal bases for each reason given for such rejection or denial which is then within the insurer’s knowledge. Where an insurer’s denial of a first party claim, in whole or in part, is based on a specific statute, applicable law or policy provision, condition or exclusion, the written denial shall include reference thereto and provide an explanation of the application of the statute, applicable law or provision, condition or exclusion to the claim. Every insurer that denies or rejects a third party claim, in whole or in part, or disputes liability or damages shall do so in writing.

(2) Subject to the provisions of subsection 2695.7(k), nothing contained in subsection 2695.7(b)(1) shall require an insurer to disclose any information that could reasonably be expected to alert a claimant to the fact that the subject claim is being investigated as a suspected fraudulent claim.

(3) Written notification pursuant to this subsection shall include a statement that, if the claimant believes all or part of the claim has been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance, and shall include the address and telephone number of the unit of the Department which reviews claims practices.

However, in part, Sections 2695.7(c), (d), and (e) also provide:

(c)(1) If more time is required than is allotted in subsection 2695.7(b) to determine whether a claim should be accepted and/or denied in whole or in part, every insurer shall provide the claimant, within the time frame specified in subsection 2695.7(b), with written notice of the need for additional time. This written notice shall specify any additional information the insurer requires in order to make a determination and state any continuing reasons for the insurer’s inability to make a determination. Thereafter, the written notice shall be provided every thirty (30) calendar days until a determination is made or notice of legal action is served. If the determination cannot be made until some future event occurs, then the insurer shall comply with this continuing notice requirement by advising the claimant of the situation and providing an estimate as to when the determination can be made.

(2) Subject to the provisions of subsection 2695.7(k), nothing contained in subsection 2695.7(c)(1) shall require an insurer to disclose any information that could reasonably be expected to alert a claimant to the fact that the claim is being investigated as a possible suspected fraudulent claim.

(d) Every insurer shall conduct and diligently pursue a thorough, fair and objective investigation and shall not persist in seeking information not reasonably required for or material to the resolution of a claim dispute.

(e) No insurer shall delay or deny settlement of a first party claim on the basis that responsibility for payment should be assumed by others, except as may otherwise be provided by policy provisions, statutes or regulations, including those pertaining to coordination of benefits.

Obviously each individual insurance policy and coverage situation must be separately evaluated. Similarly, in this unusual time many contracts between suppliers and buyers also need to be evaluated – see my prior post at

In the insurance policy context whether or not an insurer has acted reasonably or unreasonably and possible bad faith are evaluated on many different actions and criteria, some but not all of which, can include the following:

  • The failure to investigate the claim or to investigate the claim thoroughly (and fairly to the insured);
  • The failure to evaluate the claim objectively;
  • Using incorrect, erroneous, improper or unduly restrictive standards or interpretations to delay, frustrate or deny the insured’s claim or the claim form;
  • Delay in claims handling;
  • Unreasonably and unfairly requesting additional and further unnecessary documents or evidence from the insured;
  • The failure to timely or with sufficient detail communicate acceptance or denial of the claim or acceptance or denial of the individual parts of the claim;
  • Unreasonable or unfair delay in payment on the claim;
  • Unreasonably low first party or third party claim or settlement offers;
  • Unreasonable litigation, or unreasonable litigation tactics to delay, frustrate or avoid payment on the insured’s claim;
  • Unreasonable or unfair post claim interpretation or underwriting practices;
  • And other unreasonable, unfair, deceptive, abusive, or coercive practices and tactics to delay or avoid the payment of claims.

Best to you, Dave Tate, Esq. (San Francisco and California)


Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the Chair of the Business Law Section of the Bar Association of San Francisco.


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My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

      • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

      • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
      • Misappropriation of trade secrets.
      • M&A disputes.
      • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
      • Buy-sell disputes.
      • Funding and share dilution disputes.
      • Accounting, lost profits, and royalty disputes and damages.
      • Insurance coverage and bad faith.
      • Access to corporate and business records disputes.
      • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

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NAIC Seniors Consumer Insurance Fraud Alert – An Area Of Board Oversight?

The following is a link to something interesting that I came across – an alert by the National Association of Insurance Commissioners about insurance fraud scams against seniors.

Click to access legal_bulletin_seniors_beware.pdf

. The alert contains interesting statistics about the amount of possible fraud, such as “free lunch” seminars. Not to say that a “free lunch” seminar is necessarily a fraud scheme. But as we all know, the purpose of a “free” seminar is to find buyers. For me, however, the alert points to a different problem. The alert assumes that a senior who goes to a “free” seminar, for example, is mentally competent to follow the steps indicated to critically evaluate and resist the fraud. That assumption begs the question or issue: does the senior have the mental competency and fortitude to critically evaluate and resist the sales pitch? In my experience, it’s not uncommon that a senior does not have that mental capacity. Thus, in that circumstance the senior does not have the mental capacity to follow the recommendations provided by the NAIC in its alert, in which case the alert is useless, which also is the intent of the insurance sales person who is trying to sell a senior an insurance product that is not appropriate for the senior. At least policies and procedures, and board oversight of those policies and procedures, are needed so that the insurance entity and broker have in place detailed policies and procedures to determine that only appropriate policies are sold, through appropriate marketing means, with special attention to and oversight of marketing and policies sold to seniors, with the ability of the senior to rescind the policy, without having to hire legal counsel to fight it out with the insurance entity. Where is this requirement, how is it implemented, and where is the board’s active oversight?

Dave Tate, Esq. (San Francisco / California),,

Holding the Line on Charging Older People Higher Insurance Rates Under the Patient Protection and Affordable Care Act

Limit on health insurance rates for older (over age 50) adults limited to 3 times the rates for younger adults under the Patient Protection and Affordable Care Act, Click Here for Article.

Long-Term Insurance

Link to long-term insurance article, Click Here.  Enjoy.

Dave Tate, Esq. (San Francisco)