Last month, we reported on Assembly Bill 1552 (“AB 1552”), the proposed legislation by California Assembly members James C. Ramos (D-Highland) and Monique Limón (D-Santa Barbara). AB 1552 aims to provide financial relief to California businesses impacted by the COVID-19 pandemic, by allowing them to seek benefits from their insurance carriers if these businesses had an active business interruptions insurance policy in place. As we reported, business interruption policies were designed by insurance carriers to cover financial losses resulting from interruptions in a business’s day-to-day operations.
What makes AB 1552 so unique is the rebuttable presumption created by this legislation. Instead of requiring the direct physical loss of or damage to covered property to trigger insurance benefits, the bill establishes the rebuttable presumption that COVID-19 was not only present at a business’s property, but it also resulted in direct physical damage or loss of property. With over half a million COVID-19 cases confirmed in California, the bill’s passage would result in automatic financial assistance to businesses with an applicable business interruption policy and a substantial financial undertaking for the insurance industry.
To stay on the cutting edge of the ever-changing created by the pandemic, we contacted both Assembly Members to provide comments and updates. While Assembly Member Ramos was not available for comments, we were able to get in touch with a representative from Assembly Member Limón’s office. When we spoke to the representative, the bill was presented on The Assembly Floor and received a sufficient number of votes to pass the California State Assembly. The bill was currently on its way to the first of two Senate committees before being considered and voted upon on The Senate Floor. However, when presented to the Senate’s Insurance Committee, the bill’s authors were unable to garner the necessary support needed for passage. Consequently, the authors ultimately pulled the bill from consideration and further hearings.
With the California legislative session coming to an end heading into Final Recess on August 31, 2020, AB 1552 is dead in its current form. The bill could be re-introduced when the Legislature reconvenes in January 2021, but it will likely have to be redrafted to gather enough support to pass the Senate.
The death of AB 1552 is a win for the Insurance Industry as a whole; however, the bill should still serve as a warning to the industry that the California Legislature is seeking creative ways to provide aid to California business impacted by the pandemic. When the Legislature reconvenes, we will be on the lookout to see if AB 1552 or similar legislation is re-introduced.