Insurance Regulatory Report

The following regulatory information may be of interest to attorneys practicing insurance law. 

This information is current as of May 12, 2020.  Additional information about any of the below proposals may be obtained by clicking here.

Department of Insurance Regulations Currently Under Review by the Office of Administrative Law

There is one California Department of Insurance (CDI) rulemaking proposal currently under review by the Office of Administrative Law (OAL):

• FAIR Plan Methodology to Calculate Insurer Credits – OAL File #2020-0507-01. Makes non-substantive changes to the regulations governing calculation of credit for insurer voluntary writings in FAIR Plan areas.

Office of Administrative Law Actions on Department of Insurance Regulations

OAL has not acted upon any CDI rulemaking submission in the last 45 days.

Currently Proposed Department of Insurance Regulations

The following regulations have been proposed by the CDI pursuant to regular Administrative Procedure Act (APA) rulemaking and are pending completion and submission to the OAL:

• Special Investigative Units – CDI File # REG 2018-00023 –These proposed regulations clarify requirements of an insurer’s unit or division responsible for investigating possible fraudulent claims by insureds or persons making claims. On April 21, 2020, CDI issued a Third Notice of Amendment to the Text of the Regulations. The deadline for comments upon the proposed revisions was 5:00 p.m. on May 6, 2020. These changes to the regulations are not dramatic. They are comprised of wording changes recognizing that SIU functions may be performed by contractors rather than employees. The implementation date is also delayed, presumably because the regulations are taking longer to finalize than originally anticipated. The initial Notice on these regulations was July 19, 2019. The final regulations must therefore be submitted to OAL not later than July 18, 2020.
• Workers Compensation Rating Rules – CDI File # REG-2020-00007 – This proposal implements the changes proposed by the Workers Compensation Insurance Rating Bureau. The change would 1) exclude Covid-19 claims from experience rating, 2) exclude from payroll any payments to employees ordered to stay home but continue to receive pay while not doing any work for the employer, and 3) allow some stay-at-home employees to be reclassified as clerical employees. There was a telephonic hearing on this proposal on May 18, 2020. The regulations are exempt from APA rulemaking pursuant to Gov. Code 11340.9(g).

Department of Insurance Notices and Bulletins

CDI has issued five Notices and one Bulletin to P&C insurers relating to the Covid19 pandemic.

• 60-Day Grace Period for Insurance Premium Payments: Issued on March 18. Requests “that all insurance companies provide their insureds with at least a 60-day grace period to pay insurance premiums so that insurance policies are not cancelled for nonpayment”.
• Expired Drivers Licenses, Vehicle Registrations, and Insurance: Issued on March 18. “Strongly encourages auto insurers to refrain from using the expiration of policyholders’ drivers licenses or vehicle registrations for 60 days from March 16 for any of the following reasons:
  • To affect a driver’s ability to secure and maintain auto insurance coverage;
  • To affect a driver’s eligibility for a Good Drivers Discount;
  • To determine eligibility for a California Low Cost Automobile policy;
  • To impact the rates charged to any driver.”
• Extension of Policyholder Deadlines that Impact Claims or Coverage: Issued on April 3. Notifies “all licensees . . . that they should not attempt to enforce policy or statutory deadlines on policyholders until ninety (90) days after the end of the statewide ‘state of emergency’ or other ‘state of emergency” that impacts a specific policyholder.”
• Compliance with Regulatory Filing and Submittal Requirements During the COVID-19 Public Health Emergency: Issued on April 6. “Provides . . . guidance” to CDI-licensed entities regarding regulatory filings made with the Department. In very general terms, the guidance is that during the Covid-19 public health emergency, documents that need to be filed with CDI should be filed electronically.
• Delivery Drivers for California Essential Businesses: On April 9, Commissioner Lara issued a notice requesting that insurers waive commercial use exclusions in private passenger auto policies for employees temporarily providing delivery service for essential business employers, and requests similar expansions of coverage for commercial general liability policies.
• Insurance Premium Refunds, Bulletin 2020-3: On April 13, Commissioner Lara issued a Bulletin by which he “orders insurers to make an initial premium refund for the months of March and April to all adversely impacted California policyholders in the following lines of insurance, as quickly as practicable, but in any event no later than 120 days after the date of this Bulletin.” The Bulletin requires premium refunds for order requires premium refunds for auto, work comp, commercial, med mal, and “any other line of coverage where the measures of risk have become substantially overstated as a result of the pandemic.” The Bulletin also requires insurers “to report to the Department of Insurance within 60 days of the date of this Bulletin, all actions taken and contemplated future actions to refund premium in response to or consistent with this Bulletin.”

The Bulletin permits premium refunds to be made without prior approval if the refunds satisfy certain identified criteria.

Governor Newsom Executive Order on Workers Compensation

On May 6, Governor Gavin Newsom issued Executive Order N-62-20, dealing with Workers Compensation Insurance. Under the order, Covid-19 is presumed to be work-related, and therefore covered by workers compensation insurance if:

1. The employee tested positive for, or was diagnosed with Covid-19, within 14 days after the employee was last working at the employer’s workplace,
2.  The last working day at the workplace was on or after 3/19/20,
3. The employee’s workplace was not the employee’s home, and
4. If the claim is based upon a diagnosis of Covid-19 (as opposed to a test), it was made by a medical doctor and was confirmed by further testing within 30 days of the date of the diagnosis.

The presumption is “disputable and may be controverted by other evidence.” Nothing in the Order provides guidance about what such other evidence might be. The presumption only applies to claims in which the date of injury is between March 19, 2020 and July 5, 2020.

This e-Bulletin was prepared by Bill Gausewitz, Shareholder in the Sacramento office of Greenberg Traurig. Mr. Gausewitz is the former Chair of and Advisor to the Insurance Law Standing Committee of the Business Law Section of the California Lawyers Association.