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AB-1800 Fire insurance: indemnity.(2017-2018)

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Date Published: 06/19/2018 09:00 PM
AB1800:v97#DOCUMENT

Amended  IN  Senate  June 19, 2018
Amended  IN  Assembly  April 12, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 1800


Introduced by Assembly Member Levine
(Coauthors: Assembly Members Aguiar-Curry and Wood)
(Coauthors: Senators Dodd and McGuire)

January 09, 2018


An act to amend Section 2051.5 of the Insurance Code, relating to fire insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 1800, as amended, Levine. Fire insurance: indemnity.
Existing law defines the measure of indemnity for a loss under an open fire insurance policy and specifies time limits under which an insured must collect the full replacement cost of the loss. Existing law prohibits, in the event of a total loss of the insured structure, a fire insurance policy issued or delivered in the state from limiting or denying payment of the replacement cost of property if the insured decides to rebuild or replace the property at a location other than the insured premises. Existing law requires the measure of indemnity to be based upon the replacement cost of the insured property and prohibits it from being based upon the cost to repair, rebuild, or replace at a location other than the insured premises.
This bill would instead prohibit, in the event of a total loss of an insured structure, a fire insurance policy issued or delivered in this state from containing 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. The bill would prohibit the measure of indemnity from exceeding, rather than requiring it to be based upon, the replacement cost, as specified. The bill would require all policy forms issued on and after July 1, 2019, to contain these provisions.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

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


SECTION 1.

 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) Except as provided in paragraph (2), 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. Additional extensions of six months shall be provided to policyholders for good cause. In the event of a loss relating to a “state of emergency,” as defined in Section 8558 of the Government Code, no time limit of less than 24 months from the date that the first payment toward the actual cash value is made shall be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit. This section does not prohibit the insurer from allowing the insured additional time to collect the full replacement cost.
(2) 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 is for a period of 24 months, but is subject to other policy provisions, provided that an extension of time required by this paragraph beyond the period provided in the policy does not increase the additional living expense policy limit in force at the time of the loss. This paragraph shall become operative on January 1, 2007.
(c) 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.
(d) This section does not prohibit an insurer from restricting payment in cases of suspected fraud.

(e)On and after July 1, 2005, all policy forms used by an insurer shall comply with this section.

(e) On and after July 1, 2019, all policy forms issued or renewed by an insurer shall comply with this section.