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May 2020 Education Newsletter

May 2020 Education Newsletter

Alabama Issues Industry Guidance on COVID-19, Classifies Insurance as Essential

Alabama Commissioner of Insurance Jim Ridling has asked insurers writing business in the state to consider leniency and flexibility for policyholders in light of the current coronavirus outbreak, as well as confirmed that insurance operations can continue during shutdown orders.

Ridling issued a bulletin to all admitted insurers authorized to write property and casualty insurance and life, health or disability insurance in Alabama, the Alabama Insurance Underwriting Association and licensed premium finance companies because of the current circumstances related to the state of public health emergency declared by Alabama Governor Kay Ivey due to the COVID-19 pandemic.

Ridling said mitigating measures related to the virus have led to the displacement of workers and disruption of business, creating adverse financial effects.

“This, in turn, may affect the ability of these individuals or entities to make timely insurance premium payments,” the bulletin states.

Ridling recommends insurers consider the following actions for applicable policies in force as of the date of Ivey’s order, March 13, 2020:

  • Relaxing due dates for premium payments,
  • Extending grace periods
  • Waiving late fees and penalties
  • Allowing premium payment plans which will avoid a lapse in coverage
  • Expanding automobile coverage to allow personal vehicles to be covered while delivering food, medicine or other essential services for commercial purposes

The bulletin also states that insurers should consider cancellation or non-renewal of policies only after exhausting all efforts to work with policyholders to continue coverage. A policy may be cancelled or non-renewed for legally recognized reasons or policy provisions other than late or failure to pay premiums.

Further, in order to protect policyholders, workers and the general public, the commissioner has requested insurers, producers, and other licensees who accept premium payments to consider alternate methods of payment. The methods need to be consistent with safe social distancing standards and eliminate the need for in person payment. This may include online or other electronic transfers.

Affected policyholders should notify their insurance carrier or producer to explain their individual situation and difficulties complying with payment schedules.

In addition, Ridling noted in a separate bulletin on March 30 that shelter-in-place orders throughout the state of Alabama could expand before the pandemic ends, and, after consulting with the State Health Officer, all insurers and their representatives authorized to transact business in the State of Alabama may continue doing so. The bulletin states that the business of insurance and related financial services are considered essential operations and services in times of crisis.

The bulletin refers to a March 19 memorandum from the the U.S. Department of Homeland Security, Cybersecurity & Infrastructure Security Agency (CISA), that identifies essential critical infrastructure workers during the COVID-19 response.

Accordingly, as insurance companies, underwriters, producers (agents & brokers), related insurance claims, agency services, and related financial services are deemed essential services and operations, they are allowed to operate during the various orders which have been or may be issued by local governmental entities within the State of Alabama, the bulletin says.

ALDOI advises insurance company employees should seek to work remotely or behind closed doors when possible, and should follow all CDC guidelines that include social distancing, good hygiene, and other recommended practices when in-person interaction is necessary. ALDOI said it believes this bulletin meets the standards for operations under all statewide health orders currently in force.

“The ALDOI has a responsibility to protect insurance consumers in Alabama. Insurers have a responsibility to serve their customers, adjust claims, and maintain critical technology. Such responsibilities do not cease during times of crisis,” the bulletin states.

Source: Alabama Department of Insurance

CGL Coverage for

Q. Recently our insured received legal liability claim action from a former customer claiming our insured; committed fraud, misrepresentation and unfair trade practices against the former customer.

Our insured owned a separate Accounts Receivable insurance plan with another insurer to reimburse them should a customer fail to pay their invoice(s). The customer in question did not pay their invoice. The Account Receivable insurer filed a legal claim against the customer. In return the customer hired an attorney filing legal action described above against the Accounts Receivable insurer and our insured.

Our insured wants to know if their CGL coverage will pay for the legal fees resulting from this legal action. A claim was filed with the carrier, who denied coverage.

Do you feel there is any coverage for our insured under the CGL coverage?

A. The CGL policy provides coverage and defense for suits arising out of “Bodily Injury”, “Property Damage” and “Personal and Advertising Injury.  It does not appear there has been any Coverage A “bodily injury” or “property damage”.  For, coverage to apply under Coverage B, the allegations would have to meet the definition of “Personal and Advertising Injury”.  Fraud, misrepresentation, and unfair trade practices do not fall within the definition.  Since there is no coverage under either coverage part, there is also no defense.  The carrier is correct in their denial.

Source:  IIABA “Ask an Expert” Service

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