Updated November 18, 2018. Updates in red.
Property insurance is important to protect your clients’ homes, and always required when a homebuyer takes out a mortgage. Here in California, the property insurance laws may soon be getting a facelift.
Several news insurance-related bills have been introduced so far in 2018, all on their way toward becoming laws.
The reason for the update has a lot to do with the tangle of insurance quandaries created by 2017’s destructive fire season. Insurance companies are still processing over a $1 billion in insurance claims, and homeowners have been feeling the pain of delays and thinly stretched insurers, according to Mercury News.
These insurance updates will help relieve some of this burden, including directing insurance companies to extend the amount of time they will pay out for insurance claims when they are related to states of emergency in AB 1772. Another bill sets up an appeal process for homeowners who receive adverse decisions from insurers in connection to wildfire claims. Yet another directs insurers to update homeowners on replacement cost coverage, important as the majority of homeowners who lost their homes to fire were underinsured.
Read on for the full details and check in with first tuesday for updates as these bills progress through the legislature in the coming months.
AB 1797: Replacement cost coverage
Passed August 27, 2018.
AB 1797 will require property insurance providers that offer replacement cost coverage to provide the owner of residential property with an estimate of the cost to replace the property, including any extra costs the insurer will pay to bring the property up to existing codes or regulations. The insurer will need to give this updated information every other year at the time of renewal.
Insurers will be exempt from this requirement if within the previous two years the owner has increased their insurance coverage to be higher than the previous limits they had selected.
This bill will take effect on July 1, 2019.
AB 1875: Online insurance finder
Passed September 21, 2018.
AB 1875 will require the California Department of Insurance to establish an online tool to help homeowners find residential insurance brokers and agents. This tool will be called the California Home Insurance Finder.
The Department will also need to:
- survey insurance brokers for inclusion in the online tool;
- make the search tool and/or similar materials available in multiple languages;
- promote the search tool; and
- develop a pamphlet on how to accurately estimate replacement costs.
Further, when an agent will not offer extended replacement cost coverage of at least 50% above the policy limits for the dwelling, structures, contents and additional living expenses, they need to disclose to the homeowner that other providers may offer this type of coverage for the property. Until the search tool is available — no later than July 1, 2020 — this agent will need to provide the homeowner with contact information for an independent insurance agent in the property’s zip code.
AB 1923: Wildfire debris removal
Certain areas of California have consolidated debris removal programs, which cleans up debris from wildfires on a large scale. In some cases, when the governor declares a State of Emergency, these programs can be activated.
When a consolidated debris removal program is activated, AB 1923 will allow local governments to collect money from the insurance companies of covered homes in the area to pay for the clean up.
The county or agency operating the debris removal program will use a right of entry form to gain permission to clean up the homeowner’s property. The right of entry will also include a provision assigning the insurance benefits for debris removal to the county or agency.
AB 2611: Appealing wildfire insurance decisions
When a homeowner disagrees with an insurer about a determination of insurance issuance or premium amount made using a wildfire risk model, AB 2611 establishes an appeal process.
The insurer will need to respond to the appeal within 30 calendar days. During this time, the insurer may not cancel, increase the premium, fail to renew or make any other adverse underwriting decision toward the homeowner.
If the appeal results in an adverse decision by the insurer, they will need to provide factual evidence for their decision. They will also inform the homeowner of their right to appeal the insurer’s decision with the Department of Insurance, and provide contact information for doing so.
AB 3166: FAIR Insurance plans
The Fair Access to Insurance Requirements (FAIR) Plan Association makes available basic home insurance plans to provide coverage for homeowners who are otherwise unable to procure insurance. These plans are made available through mainstream insurers, though some homeowners facing a hard time qualifying for insurance may be unaware these basic plans are available.
AB 3166 will require insurers to inform homeowners about these FAIR Plan Association policies so homeowners know their full range of insurance options.
AB 1772: Extending insurance collection times
Passed September 21, 2018.
When a homeowner makes a claim for the destruction or loss of their property and they are insured for the full replacement cost, they have a limited amount of time to collect on the full insured amount. The insurer pays for the repairs or replacement until the property is fully repaired or replaced, which sometimes may exceed the time limit.
When the loss is related to a declared state of emergency, the time limit to collect is currently 24 months from the first payment made by the insurance company to fix or replace the property. AB 1772 will increase this limit to 36 months for the date of the first insurance payment.
Insurance policy forms will need to be updated to reflect this change by July 1, 2019. However, policy changes take effect immediately.