Many major insurers are staking out positions and arguments to limit their losses from the pandemic. Yet, blanket claim denials are improper.
California’s Insurance Commissioner, like other state insurance commissioners, has indicated that whether a current insurance policy covers a pandemic claim must be decided on a case-by-case basis in accordance with the specific language of each policy and also relevant case law.
Yet, insureds should expect loss from COVID-19 to be specifically excluded from coverage in new or renewed policies. The change will impact future claims made under those policies.
The distinction between notice of an actual “claim” and notice of “circumstances that may give rise to a claim” may not be that different. A coverage obligation may arise under either type of notice. Under a notice of circumstances,
properly crafted to give notice of potential claim, there may be a coverage obligation under a current policy if such a claim later arises.
Relevant case law is fairly clear for both insurers and insureds. Although the requirements for a “notice of circumstance” may vary, a common formulation allows a policyholder to provide notice of “any circumstances which may reasonably be expected to give rise to a claim,” described with reasonable detail. Judges routinely hold that such notice may be adequate for preserving coverage under an existing policy for lawsuits or claims that may arise in the future but are traceable to the circumstances for which notice was given.
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