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AB-3012 Residential property insurance.(2019-2020)

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Date Published: 05/11/2020 09:00 PM
AB3012:v97#DOCUMENT

Amended  IN  Assembly  May 11, 2020
Amended  IN  Assembly  May 04, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 3012


Introduced by Assembly Members Wood and Daly

February 21, 2020


An act to amend Sections 678, 2051.5, 2060, 10095, and 10103.7 of the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 3012, as amended, Wood. Residential property insurance.
Existing law generally regulates classes of insurance, including fire and property insurance. Existing law requires a residential property insurer to allow an insured that has suffered a loss relating to a declared state of emergency to combine the policy limits for primary dwelling and other structures, and to use the combined amount to rebuild or replace the dwelling, as specified. Existing law requires a policy to provide coverage for additional living expenses for a period of no less than 24 months from the inception of the loss, for a loss relating to a state of emergency. Existing law prohibits, in the event of a total loss of the insured structure, a policy from limiting or denying payment of the building code upgrade cost or the replacement cost on the basis that the insured has decided to rebuild at a new location or to purchase an already built home at a new location.
For a total loss of a furnished residence related to a declared state of emergency, this bill would require an insurer to provide a payment for contents of no less than 30% of the policy limit, as specified, without requiring an itemized claim. For a covered loss relating to a state of emergency, the bill would prohibit a policy that provides coverage for additional living expenses from limiting the policyholder’s right to recovery if the insured home is not inhabitable or otherwise usable, as specified. specified, but would authorize an insurer to provide an alternative remedy that addresses the property condition that precludes habitation. The bill would require the measure of damages available to a policyholder to use to rebuild or replace the insured home at another location to be the amount that would have been recoverable had the insured dwelling been rebuilt, without deduction for the value of land at the new location.
Existing law requires the Insurance Commissioner to establish the California Home Insurance Finder on the Department of Insurance internet website to connect homeowners in need of insurance assistance to an insurance agent or broker for residential property insurance. Under existing law, the California FAIR Plan Association, a joint reinsurance association in which all insurers licensed to write basic property insurance participate, administers a program for the equitable apportionment of basic property insurance for persons who are unable to obtain that coverage through normal channels. Existing law requires an insurance agent or broker to assist a person to obtain property insurance coverage by one of several specified methods.
This bill would require a notice of nonrenewal for a residential property insurance policy expiring on or after July 1, 2021, to be accompanied by a document that includes specified information, including specified statement that includes an explanation of how the California Home Insurance Finder can help a person find a homeowners’ insurance policy and information about FAIR Plan policies. The bill would require the California FAIR Plan Association, on or before July 1, 2021, to develop and implement a clearinghouse program to help reduce the number of existing FAIR Plan policies and provide the opportunity for admitted insurers to offer homeowners’ insurance policies to FAIR Plan policyholders.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

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


SECTION 1.

 Section 678 of the Insurance Code is amended to read:

678.
 (a) At least 45 days before policy expiration, an insurer shall deliver to the named insured or mail to the named insured at the address shown in the policy, either of the following:
(1) An offer of renewal of the policy contingent upon payment of premium as stated in the offer, stating each of the following:
(A) Any reduction of limits or elimination of coverage.
(B) The telephone number of the insurer’s representatives who handle consumer inquiries or complaints. The telephone number shall be displayed prominently in a font size consistent with the other text of the renewal offer.
(2) A notice of nonrenewal of the policy. That notice shall contain all of the following:
(A) The reason or reasons for the nonrenewal.
(B) The telephone number of the insurer’s representatives who handle consumer inquiries or complaints. The telephone number shall be displayed prominently in a font size consistent with the other text of the notice of nonrenewal.
(C) Until July 1, 2020, a brief statement indicating that if the consumer has contacted the insurer to discuss the nonrenewal and remains unsatisfied, the consumer may have the matter reviewed by the department. The statement shall include the telephone number of the unit within the department that responds to consumer inquiries and complaints.
(D) On or after July 1, 2020, a statement that if the consumer has contacted the insurer to discuss the nonrenewal and remains unsatisfied, the consumer may have the matter reviewed by the department. The statement shall include the department’s internet website, www.insurance.ca.gov, the department’s telephone number, (800) 927-HELP (4357), and the mailing address of the department’s Consumer Services Division, 300 S. Spring Street, Los Angeles, CA 90013.
(b) If an insurer fails to give the named insured either an offer of renewal or notice of nonrenewal as required by this section, the existing policy, with no change in its terms and conditions, shall remain in effect for 45 days from the date that either the offer to renew or the notice of nonrenewal is delivered or mailed to the named insured. A notice to this effect shall be provided by the insurer to the named insured with the policy or the notice of renewal or nonrenewal.
(c) Notwithstanding subdivisions (a) and (b), with respect to a notice of nonrenewal for a policy that expires on or after July 1, 2020, the following timelines apply:
(1) At least 75 days before the policy expiration, the insurer shall deliver the notice of nonrenewal to the named insured or mail the notice of nonrenewal to the named insured at the address shown in the policy. The notice shall include the information contained in paragraph (2) of subdivision (a).
(2) If an insurer fails to give the named insured a notice of nonrenewal at least 75 days prior to the policy expiration, as required by paragraph (1), the existing policy, with no change in its terms and conditions, shall remain in effect for 75 days from the date that the notice of nonrenewal is delivered or mailed to the named insured. A notice to this effect shall be provided by the insurer to the named insured with the notice of nonrenewal.
(d) A policy written for a term of less than one year shall be considered as if written for a term of one year. A policy written for a term longer than one year, or a policy with no fixed expiration date, shall be considered as if written for successive policy periods or terms of one year.
(e) A notice of nonrenewal for a policy expiring on or after July 1, 2021, shall be accompanied by a document that includes the following: the following notice:

(1)An explanation of how the California Home Insurance Finder, established pursuant to Section 10095.7, can help the homeowner find a homeowners’ insurance policy.

(2)Information regarding coverage offered by the California FAIR Plan Association and the process to apply for a FAIR Plan policy.

(3)An explanation of the obligation of an agent or broker to assist the homeowner to apply to the California FAIR Plan Association, pursuant to Section 10095.5.

(4)Information regarding the availability of supplemental insurance for FAIR Plan policyholders.


The California Department of Insurance has developed the California Home Insurance Finder, an online tool that can assist you in obtaining insurance for your property. The Finder contains names, addresses, phone numbers, and internet website links of licensed insurance agents, brokers, and insurance companies organized by ZIP Code and languages in which the agent, broker, or insurance company transacts insurance.
The California FAIR Plan (FAIR Plan) is mandated by state law to provide basic fire insurance as the “insurer of last resort” to those who cannot find insurance coverage for their property in the regular market. The FAIR Plan provides basic fire insurance coverage for residential and commercial structures, as well as personal property coverage for residential and business occupancies. However, FAIR Plan policies do not cover liability, theft, or water damage, among other things. There are also optional coverages available for both residential and commercial properties. Applications can be made directly with the FAIR Plan (cfpnet.com), although the FAIR Plan strongly encourages use of a licensed agent or broker for assistance in preparing and obtaining a quote. There is no additional cost for using an agent or broker.
California law requires an agent or broker to assist a person seeking a FAIR Plan policy by (1) submitting a coverage application to the FAIR Plan on behalf of the consumer, (2) providing the consumer with contact information for the FAIR Plan, or (3) obtaining a policy for the consumer through an admitted or nonadmitted insurer.
To supplement a FAIR Plan Dwelling policy, a Difference in Conditions (DIC) policy should be considered. A DIC policy is sold by private insurers, and provides coverage for things not covered by the basic fire insurance policy provided by the FAIR Plan. A consumer who wants broader coverage than that provided by the FAIR Plan policy should contact an agent, broker, or insurance company that offers a DIC policy to obtain this extended coverage. The Department of Insurance maintains a list of insurance companies that sell DIC policies on its internet website (insurance.ca.gov). Additional assistance may be obtained by contacting an agent or broker listed with the Department’s online Finder.

(f) An insurer may use a notice substantially similar to the notice set forth in subdivision (e) to the extent that the notice provides additional or more detailed information.

(f)

(g) This section applies only to policies of insurance specified in Section 675.

SEC. 2.

 Section 2051.5 of the Insurance Code is amended to read:

2051.5.
 (a) (1) Under an open policy that requires payment of the replacement cost for a loss, the measure of indemnity is the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less.
(2) If the policy requires the insured to repair, rebuild, or replace the damaged property in order to collect the full replacement cost, the insurer shall pay the actual cash value of the damaged property, as defined in Section 2051, until the damaged property is repaired, rebuilt, or replaced. Once the property is repaired, rebuilt, or replaced, the insurer shall pay the difference between the actual cash value payment made and the full replacement cost reasonably paid to replace the damaged property, up to the limits stated in the policy.
(b) (1) (A) A time limit of less than 12 months from the date that the first payment toward the actual cash value is made shall not be placed upon an insured in order to collect the full replacement cost of the loss, subject to the policy limit.
(B) In the event of a loss relating to a “state of emergency,” as defined in Section 8558 of the Government Code, a time limit of less than 36 months from the date that the first payment toward the actual cash value is made shall not be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit.
(C) This section does not prohibit an insurer from allowing the insured additional time to collect the full replacement cost.
(2) An insurer shall provide to a policyholder one or more additional extensions of six months for good cause pursuant to subparagraph (A) or (B) of paragraph (1) if the insured, acting in good faith and with reasonable diligence, encounters a delay or delays in approval for, or reconstruction of, the home or residence that are beyond the control of the insured. Circumstances beyond the control of the insured include, but are not limited to, unavoidable construction permit delays, the lack of necessary construction materials, or the unavailability of contractors to perform the necessary work.
(c) (1) In the event of a total loss of the insured structure, a policy issued or delivered in this state shall not contain a provision that limits or denies, on the basis that the insured has decided to rebuild at a new location or to purchase an already built home at a new location, payment of the building code upgrade cost or the replacement cost, including any extended replacement cost coverage, to the extent those costs are otherwise covered by the terms of the policy or any policy endorsement. However, the measure of indemnity shall not exceed the replacement cost, including the building code upgrade cost and any extended replacement cost coverage, if applicable, to repair, rebuild, or replace the insured structure at its original location.
(2) Notwithstanding any other law, the measure of damages available to a policyholder to use to rebuild or replace the insured home at another location shall be the amount that would have been recoverable had the insured dwelling been rebuilt, and a deduction for the value of land at the new location shall not be permitted from that measure of damages.
(d) This section does not prohibit an insurer from restricting payment in cases of suspected fraud.
(e) (1) On and after July 1, 2005, and only until July 1, 2019, all policy forms used by an insurer shall be in compliance with this section, except for the changes made to this section by the act that added paragraph (2).
(2) On and after July 1, 2019, all policy forms issued or renewed by an insurer shall comply with this section in its entirety, including the changes made to this section by the act that added this paragraph.

SEC. 3.

 Section 2060 of the Insurance Code is amended to read:

2060.
 (a) In the event of a loss under a homeowners’ insurance policy for which the insured has made a claim for additional living expenses, the insurer shall provide the insured with a list of items that the insurer believes may be covered under the policy as additional living expenses. The list may include a statement that the list is not intended to include all items covered under the policy, but only those that are commonly claimed, if this is the case. If the department develops a list for use by insurers, the insurer may use that list
(b) (1) In the event of a covered loss relating to a state of emergency, as defined in Section 8558 of the Government Code, coverage for additional living expenses shall be for a period of no less than 24 months from the inception of the loss, but shall be subject to other policy provisions. An insurer shall grant an extension of up to 12 additional months, for a total of 36 months, if an insured acting in good faith and with reasonable diligence encounters a delay or delays in the reconstruction process that are the result of circumstances beyond the control of the insured. Circumstances beyond the control of the insured include, but are not limited to, unavoidable construction permit delays, lack of necessary construction materials, and lack of available contractors to perform the necessary work. Additional extensions of six months shall be provided to policyholders for good cause.
(2) A policy that provides coverage for additional living expenses subject to this subdivision shall not limit the policyholder’s right to recovery if the insured home is not inhabitable or otherwise usable as a dwelling due to orders from appropriate authorities affecting access to the property, or conditions affecting habitability, such as smoke or smoke damage, a lack of power or water, or other conditions or services necessary to the normal use of the dwelling. However, an insurer may, as an alternative to making living expense payments, provide an alternative remedy that addresses the property condition that precludes habitation.

SEC. 4.

 Section 10095 of the Insurance Code is amended to read:

10095.
 (a) Within 30 days following the effective date of this chapter, the association shall submit to the commissioner, for the commissioner’s review, a proposed plan of operation, consistent with this chapter, creating an association consisting of all insurers licensed to write and engaged in writing in this state, on a direct basis, basic property insurance or any component of basic property insurance in homeowners or other dwelling multiperil policies. An insurer described in this subdivision shall be a member of the association and shall remain a member as a condition of its authority to transact those kinds of insurance in this state.
(b) The proposed plan shall authorize the association to assume and cede reinsurance on risks written by insurers in conformity with the program.
(c) Under the plan, an insurer shall participate in the writings, expenses, and profits and losses of the association in the proportion that its premiums written during the second preceding calendar year bear to the aggregate premiums written by all insurers in the program, excluding that portion of the premiums written attributable to the operation of the association. Premiums written on a policy of basic residential earthquake insurance issued by the California Earthquake Authority pursuant to Section 10089.6 shall be attributed to the insurer that writes the underlying policy of residential property insurance.
(d) The plan shall provide for administration by a governing committee under rules to be adopted by the governing committee with the approval of the commissioner. Voting on administrative questions of the association and facility shall be weighted in accordance with each insurer’s premiums written during the second preceding calendar year as disclosed in the reports filed by the insurer with the commissioner.
(e) The plan shall provide for a plan to encourage persons to secure basic property insurance through normal channels from an admitted insurer or a licensed surplus line broker by informing those persons what steps they must take in order to secure the insurance through normal channels.
(f) The plan shall be subject to the approval of the commissioner and shall go into effect upon the tentative approval of the commissioner. The commissioner may, at any time, withdraw tentative approval or the commissioner may, at any time after giving final approval, revoke that approval if the commissioner feels it is necessary to carry out the purposes of the chapter. The withdrawal or revocation of that approval shall not affect the validity of any policies executed before the date of the withdrawal. If the commissioner disapproves or withdraws or revokes their approval to all or any part of the plan of operation, the association shall, within 30 days, submit for review an appropriately revised plan or part of a revised plan, and, if the association fails to do so, or if the revised plan is unacceptable, the commissioner shall promulgate a plan of operation or part of a plan as the commissioner may deem necessary to carry out this chapter.
(g) The association may, on its own initiative or at the request of the commissioner, amend the plan of operation, subject to approval by the commissioner, who shall have supervision of the inspection bureau, the facility, and the association. The commissioner, or any person designated by the commissioner, shall have the power of visitation of and examination into the operation and free access to all the books, records, files, papers, and documents that relate to operation of the facility and association, and may summon, qualify, and examine as witnesses all persons having knowledge of those operations, including officers, agents, or employees thereof.
(h) An insurer member of the plan shall provide to an applicant who is denied coverage, or a policyholder whose policy is canceled or not renewed, the internet website address and statewide toll-free telephone number for the plan established pursuant to Section 10095.5 for the purpose of obtaining information and assistance in obtaining basic property insurance.
(i) To reduce the association’s concentration and number of policies, and to encourage maximum use of the normal insurance market consistent with subdivision (c) of Section 10090, the association shall develop and implement a clearinghouse program on or before July 1, 2021, to help reduce the number of existing FAIR Plan policies and provide the opportunity for admitted insurers to offer homeowners’ insurance policies to FAIR Plan policyholders.

SEC. 5.

 Section 10103.7 of the Insurance Code is amended to read:

10103.7.
 (a) In the event of a covered loss relating to a state of emergency, as defined in Section 8558 of the Government Code, an insured under a residential property insurance policy shall be permitted to combine payments for claims for losses up to the policy limits for the primary dwelling and other structures, for any of the covered expenses reasonably necessary to rebuild or replace the damaged or destroyed dwelling, if the policy limits for coverage to rebuild or replace the primary dwelling are insufficient. Any claims payments for losses pursuant to this subdivision for which replacement cost coverage is applicable shall be for the full replacement value of the loss without requiring actual replacement of the other structures or contents. Claims payments for other structures in excess of the amount applied towards the necessary cost to rebuild or replace the damaged or destroyed dwelling shall be paid according to the terms of the policy.
(b) (1) In the event of a covered total loss of a primary dwelling under a residential property insurance policy resulting from a state of emergency, as defined in Section 8558 of the Government Code, if the residence was furnished at the time of the loss, the insurer shall offer a payment under the contents coverage in an amount no less than 30 percent of the policy limit applicable to the covered dwelling structure, up to a maximum of two hundred fifty thousand dollars ($250,000), without requiring the insured to file an itemized claim.
(2) After receiving the payment described in paragraph (1), the insured may recover additional amounts up to the policy limit for contents coverage by filing a claim pursuant to the terms of the policy for the loss of contents that exceeds the value of the payment provided pursuant to paragraph (1).
(3) When an insured files a claim relating to a state of emergency, as defined in Section 8558 of the Government Code, the insurer shall notify the insured of the option to receive payment for loss of contents pursuant to paragraph (1) and of the insured’s option to subsequently file a full itemized claim pursuant to paragraph (2).
(4) This subdivision does not affect payment under the policy for scheduled personal property.
(5) This section does not prohibit an insurer from restricting payment in cases of suspected fraud.