The California Senate — by a 24 to 11 vote — has passed Senate Bill 894 and sent it to the Assembly for action. Basically the bill impacts the disaster losses of homeowners. Here are the basics:
• Insurers will be required to offer renewals for two annual renewal periods — or 24 months which ever is greater
• The current law is one renewal period
• If a policy has a dollar limit for additional living expenses, insurers will be obligated to extend coverage for up to 12 additional months for a total of 36 months
• This is if the policyholder acts in good faith and if the delay is beyond their control
• If policyholders suffer a loss in what is declared a state of emergency, insurers will be required to combine policy limits for primary dwellings and other structures, and contents, and use the combined amount as specified
The bill is sponsored by California Insurance Commissioner Dave Jones and authored by Napa, California Democrat Sen. Bill Dodd. Both think this bill and others now in the Legislature addressing this issue are critical to consumers.
Dodd said, “Knowing that fires, floods, and other natural disasters will happen again, we need to take steps now to improve fairness, flexibility and transparency in insurance coverage. Simply put, we need to do everything we can to help victims of natural disasters recover. Recovering from disasters takes a team effort, and I’ll continue pushing the state to do its part.”
The senator is happy with the result but did have to make some concessions to insurers to get his bill passed. One is making sure payments apply only to actual losses and not the maximum amount listed on each policy line.
One negative for insurance is the bill extending policy renewal protections and making them retroactive to July 1, 2017. What insurers question is the bill making these terms retroactive. What the Legislature is doing — if this passes — is changing the terms of a contract that is already in force. That means wildfire survivors will benefit. It allows policyholders to repurpose unused portions of their coverage toward rebuilding their homes.
That pleases California Insurance Commissioner Dave Jones. He said, “This is an important bill that will not only assist current wildfire survivors, but will also help to jump start the rebuilding and economic recovery process. Residents who have lost everything are struggling to recover and rebuild their homes and lives. This bill will provide much-needed protections and improve chances for recovery.”
Kara Cross is the general counsel for the Personal Insurance Federation of California. She says Dodd’s bill is like trying to combine apples and oranges. Someone buys $175,000 of coverage on a farm but may really only own a $20,000 shed. This law lets the insured max out the $175,000 instead of $20,000.
Rates — she says — could go up if this passes.
Armand Feliciano of the Property Casualty Insurers Association of America (PCI) agrees. He said, “At some point, people are going to look at their numbers and say, ‘if I can’t make this work, I can’t stay in this market,’ That’s reality for all businesses.”
What Jones isn’t pleased about is the shelving of Senate Bill 897. Healdsburg Democrat Sen. Mike McGuire’s bill would require insurers to pay policyholders 80% of their contents coverage without a detailed inventory. It would also let policyholders stay in Airbnb or RV rentals while their home is being built if hotels and long-term rentals aren't available.
The commissioner went on the offensive and accused insurers of an all-out and unreasonable assault on consumers.
“Insurers opposing SB 897 have shown their true colors in efforts to defeat this common-sense legislation-their priority is profit over the needs of their policyholders who have been through hell. This is about doing the right thing to help wildfire survivors begin the recovery process without putting them through more heartache and pain during one of the most difficult times in their lives,” Jones said.
Jones thinks insurers can afford to do the 80% and said less than a tenth of one-percent of the more than eight million homeowners policies suffer total losses.
McGuire is equally disappointed at having to shelve his bill. “We took numerous reasonable amendments leading into these latest discussions, but we had to draw the line when insurance corporations insisted on amendments that would have watered down the bill close to useless. Quite frankly: The deal that was put on the table harms those who are struggling to recover, now, and all future homeowners who would be impacted by California's new normal,” McGuire said.
Source links: Insurance Business America, CBS Local, Times-Herald News, The Office of California Insurance Commissioner Dave Jones — link 1, link 2, KQED, Sacramento Bee