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AB-2436 Residential property insurance.(2019-2020)

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Date Published: 05/19/2020 09:00 PM
AB2436:v98#DOCUMENT

Amended  IN  Assembly  May 19, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2436


Introduced by Assembly Member Bloom

February 19, 2020


An act to amend Sections 10102 and 10103 of the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 2436, as amended, Bloom. Residential property insurance.
Existing law generally regulates residential property insurance. Existing law prescribes the standard form of the California Residential Insurance Disclosure, which sets forth a description of certain types of insurance coverage, and explains that building code upgrade coverage covers additional costs to comply with building codes in effect at the time of loss or rebuilding. Existing law requires specified information, including whether or not the policy provides building code upgrade coverage for the increased costs of repairing or replacing damage because of building ordinances or laws, to be included on the declarations page of a residential property insurance policy.

This bill would require a policy of residential property insurance to include building code upgrade coverage of no less than 15% of the dwelling coverage policy limits. The bill would require building code upgrade coverage to be based on the increased costs associated with building ordinances and laws at the time of rebuilding, and not at the time of the loss. The bill would amend the California Residential Insurance Disclosure to specify that building code upgrade coverage covers additional costs to comply with building codes only in effect at the time of rebuilding. The bill would require additional information relative to building code upgrade coverage to be stated on the declarations page of a residential property insurance policy, including any applicable limits on that coverage.

This bill would require a policy of residential property insurance that provides replacement cost coverage, issued or renewed on or after July 1, 2021, to provide additional building code upgrade coverage of no less than 10% of the dwelling coverage policy limits. The bill would require building code upgrade coverage to be based on the increased costs associated with building ordinances and laws at the time of loss or rebuilding. The bill would further require, also on or after July 1, 2021, a policy of residential property insurance that provides replacement cost coverage to include specific information relating to building code upgrade coverage on the declarations page of the policy and would amend the California Residential Insurance Disclosure accordingly. The bill would require a policy of residential property insurance that provides actual cash value coverage and does not provide replacement cost coverage or building code upgrade coverage to include a statement on the declarations page of the policy that the policy does not include building code upgrade coverage.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 10102 of the Insurance Code is amended to read:

10102.
 (a) The disclosure required by Section 10101 shall be in no less than 10-point typeface and shall be provided prior to or concurrent with, the application for a policy of residential property insurance. In the event that an application is made by telephone, an insurer that mails a copy of the disclosure within three business days shall be in compliance with this section. For policies issued on or after July 1, 1993, the agent or insurer shall obtain the applicant’s signature acknowledging receipt of the disclosure form within 60 days of the date of the application. When the insurer or agent establishes delivery of the disclosure form by obtaining the signature of the applicant or insured, or when an insurer or agent provides the applicant with the disclosure form and the applicant does not return a signed acknowledgment of receipt within 60 days of the date it was provided, there shall be a conclusive presumption that the insurer or agent has complied with the disclosure requirement of this chapter. The insurer or agent shall have the burden of demonstrating in accordance with California Rules of Evidence that the disclosure was provided to the applicant or insured. A signature shall not be required at the time of renewal.
If the disclosure is mailed to the named insured or applicant, it shall be mailed to the mailing address shown on the policy of residential property insurance or to the address requested by the applicant. First-class mail shall be deemed adequate for proof of mailing. The insurer shall have the burden of demonstrating in accordance with California Rules of Evidence that the disclosure was mailed to the applicant or insured.
The disclosure shall contain the following language:
PRINTER PLEASE NOTE: TIP-IN MATERIAL TO BE INSERTED
(b) The agent or insurer shall indicate on the disclosure form which coverages the applicant or insured has selected or purchased.
(c) The disclosure statement may contain additional provisions not conflicting with, annulling, or detracting from the foregoing.
(d) Following the issuance of the policy of residential property insurance, the insurer shall provide the disclosure statement to the insured on an every-other-year basis at the time of renewal. The disclosure required by this section may be transmitted with the material required by Section 10086.1.
(e) A policy of residential property insurance shall not be initially issued as guaranteed replacement cost coverage if it contains any maximum limitation of coverage based on any set dollar limits, percentage amounts, construction cost limits, indexing, or any other preset maximum limitation for covered damage to the insured dwelling. The limitations referred to in this section are solely applicable to dwelling structure coverages. Endorsements covering additional risks to the insurer’s dwelling structure coverage may have internal limits as long as those endorsements are not called guaranteed replacement cost coverage.
(f) A policy of residential property insurance shall not be renewed as guaranteed replacement cost coverage if it contains any maximum limitation of coverage based on any set dollar limits, percentage amounts, construction cost limits, indexing, or any other preset maximum limitation for covered damage to the insured dwelling. The limitations referred to in this section are solely applicable to dwelling structure coverages. Endorsements covering additional risks to the insurer’s dwelling structure coverage may have internal limits as long as those endorsements are not called guaranteed replacement cost coverage.
(g) Coverage provided for building code upgrades by a policy of residential property insurance shall be applicable to building codes, ordinances, standards, or laws only to the extent that those codes, ordinances, standards, or laws do not impose stricter standards on the property on the basis of the level of insurance coverage applicable to the property.
(h) The disclosure required by Section 10101 shall also be provided to the mortgagor in the event that a policy is forced placed by an insurer at the request of a mortgagee. In those cases, neither the insurer nor the mortgagee shall be required to obtain a signature from the mortgagor. A disclosure shall not be required to be provided with respect to blanket policies issued to a mortgagee, and designed to provide interim coverage for losses occurring before the mortgagee has knowledge of the lapse of the policy and before placement of a policy on behalf of the mortgagor.
(i) A disclosure required by Section 10101 that is provided on and after January 1, 2020, shall include any fire safety-related discounts offered by the insurer.

SEC. 2.

 Section 10103 of the Insurance Code is amended to read:

10103.
 (a) A policy of residential property insurance shall not be issued or renewed in this state unless it provides the following information on the declarations page of the policy:
(1) The limits of liability for the structure.
(2) The following statement regarding the valuation of the structure:
“The limit of liability for this structure (Coverage A) is based on an estimate of the cost to rebuild your home, including an approximate cost for labor and materials in your area, and specific information that you have provided about your home.”
(3) Limits of liability for personal property.
(4) Deductibles.
(5) A For a residential property insurance policy that provides replacement cost coverage, a statement that the policy provides building code upgrade coverage for the increased costs of repairing or replacing damage to the insured dwelling caused by a covered loss because of building ordinances or laws regulating the repair or replacement. Building code upgrade coverage is provided based on the increased costs associated with building ordinances or laws in effect at the time of loss or rebuilding, up to policy limits for this coverage. The policy may denote restrictions, if any, on coverage for compliance with applicable building codes which take effect after the date of loss but prior to the issuance of required building permits.
(b) If the policy includes building code upgrade coverage, it shall do both of the following:
(1) State it includes building code upgrade coverage on the declaration page in no less than 10-point type, state any applicable limits on the amount of coverage, and, if the policy contains other terms, conditions, or restrictions for coverage, disclose on the declarations page that those terms, conditions, or restrictions are identified on a separate disclosure form attached to the declarations page.
(2) If the building code upgrade coverage is subject to any terms, limits, conditions, or restrictions, state the terms, limits, conditions, or restrictions on a separate disclosure form attached to the declarations page. The separate disclosure form shall be printed in no less than 10-point type.
(c) A policy of residential property insurance that provides replacement cost coverage shall not be issued or renewed unless it provides additional building code upgrade coverage of no less than 15 10 percent of the dwelling coverage policy limits. The building code upgrade coverage required by this subdivision shall be additional coverage, and use of this coverage shall not reduce or deplete the dwelling coverage policy limits for the insured property. This subdivision does not prohibit an insurer from offering building code upgrade coverage of greater than 15 10 percent of the dwelling coverage policy limits, in addition to providing the minimum coverage of 15 10 percent of the dwelling coverage policy limits.
(d) The provisions of paragraphs (1), (2), and (5) of subdivision (a), subdivision (b), and subdivision (c) are not required for policies purchased by tenants or unit owners that do not cover the structure of the premises.
(e) (1) The requirements of paragraph (5) of subdivision (a), subdivision (b), and subdivision (c) shall not apply to a policy of residential property insurance that provides actual cash value coverage and does not provide replacement cost coverage or building code upgrade coverage.
(2) A policy of residential property insurance that provides actual cash value coverage and does not provide replacement cost coverage or building code upgrade coverage shall include on the declarations page of the policy in no less than 10-point typeface the following statement: “THIS POLICY DOES NOT INCLUDE BUILDING CODE UPGRADE COVERAGE.”
(f) The amendments to this section made by the act adding this subdivision shall be operative for any policy issued or renewed on or after July 1, 2021, except that an insurer that files a complete rate application, including, without limitation, a form change application or rule filing, by no later than April 1, 2021, in order to comply with the provisions of this act, shall begin issuing and renewing policies in compliance with this section within 75 days following the commissioner’s prior approval of that complete rate application, including, without limitation, a form change application or rule filing.