California Legislators React to Wildfire Claims
By Andrew B. Downs
Large-scale disasters are a challenge for property insurers. One of those challenges is both regulators and legislators react to what they perceive as unfairness in claims handling, even when that claims handling is fully compliant with contractual and existing legal requirements.
In the wake of the North Bay and Ventura/Santa Barbara Wildfires, California legislators have introduced a number of bills and have announced an intention to introduce additional bills. A summary from the California Department of Insurance can be reached here. The proposed changes include increasing the time limits for loss of use/additional living expense, allowing limits from various types of coverage to be pooled for use in replacing the dwelling and extending the suit time limit.
In particular, pending are the following:
- SB 894 – Would permit policyholders who suffer a loss relating to a declared state of emergency by the Governor to combine their policy limits for the dwelling, other structures, contents and additional living expenses for any covered expense. It also extends to three years the period during which the policyholder may repair or replace and claim replacement cost valuation and extends to two years the policyholder's protection against non-renewal.
- SB 897 – Expands the definition of residential additional living expenses to include all reasonable expenses incurred by the insured. In the event of a loss relating to a declared state of emergency, it requires the insurer to advance no less than four months additional living expenses and requires insurers to adopt a standard four-month additional living expense amount. In addition, it prohibits companies from requiring the use of a company-specific inventory form so long as the policyholder provides substantially the same information. It also requires property insurers to accept inventories that group categories of personal property rather than list each item separately. Finally, if the policyholder has made a claim for total loss of a primary residence, the insurer must offer a settlement of no less than 80% of the contents limit in lieu of requiring the policyholder to submit an itemized claim.
- AB 1772 – This bill also extends to three years the period during which the policyholder may repair or replace and claim replacement cost valuation.
- AB 1797 – This bill requires insurers to provide an estimate of replacement value for every policy of residential property insurance issued or renewed after January 1, 2019. Any insurer that fails to provide an estimate will be held liable for the full replacement cost of the insured property, regardless of policy limits. Any insurer that complies and provides an estimate will have its liability capped at policy limits.
- AB 1799 – This modifies existing law to require the insurer to provide a complete certified copy of the policy following a loss, and requires that the insurer also provide the policy in electronic form upon request.
- AB 1800 – California law currently permits a policyholder to replace the insured property at a different location. This bill would modify existing law to make it also apply to any extended replacement cost coverage purchased, and to clarify that it applies whether the policyholder rebuilds at the same or a new location or purchases an existing dwelling at a new location.
Various members of the California legislature have also announced an intent to introduce legislation which would modify debris removal obligations, require mandatory extended replacement cost coverage of at least 50% to be offered and to extend the suit time limit from 12 months to 24 months.
All of this legislation is months away from enactment and all is likely to be amended while it proceeds through the legislature. We will continue to track this legislation and will report any significant developments. For additional information, please contact us.