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SB-824 Insurers: declared disaster: homeowners’ insurance policies.(2017-2018)

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Date Published: 04/16/2018 12:36 PM
SB824:v98#DOCUMENT

Amended  IN  Senate  April 16, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 824


Introduced by Senator Lara
(Principal coauthor: Senator McGuire)
(Coauthors: Senators Allen, Dodd, Hill, and Skinner)

January 03, 2018


An act to amend Sections 675.1 and 676 Section 675.1 of, and to add Section 758.8 to, the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


SB 824, as amended, Lara. Insurance: nonrenewal. Insurers: declared disaster: homeowners’ insurance policies.
(1) Existing law requires an insurer to comply with certain procedures relating to the cancellation of insurance policies, except as specified, in the case of a total loss to the primary insured structure under a residential policy. Among other requirements, an insurer may not cancel coverage while the primary insured structure is being rebuilt, as specified, nor use the fact that the primary insured structure is in damaged condition as a result of the total loss as the sole basis for a decision to cancel the policy, and must offer, at least once, to renew the policy, as specified, if the total loss to the primary insured structure was caused by a disaster.

This bill would express the intent of the Legislature to clarify that the provision described above is applicable to all insured properties located within a county for which a state of emergency has been declared, as specified.

(2)Existing law prohibits cancellation of a policy that has been in effect for 60 days unless, after the effective date of the policy, one or more specified acts have occurred, including nonpayment of the premium, conviction of the named insured of a crime having as one of its necessary elements an act increasing any hazard insured against, or the discovery of fraud or material misrepresentation, as specified.

This bill would also prohibit the nonrenewal of the policy under those circumstances.

This bill would prohibit an insurer from canceling, refusing to renew, or including a surcharge or an increase in the premium of, a policy of residential property insurance based solely on the fact that the insured structure is located in a county in which one or more catastrophic events have occurred for which a state of emergency has been declared for one year after the declaration of a state of emergency, as specified.

(3)

(2) Existing law governs the business of insurance and proscribes certain unlawful practices. Existing law requires the Insurance Commissioner to enforce the laws and regulations governing the business of insurance.
This bill would require an insurer that intends to materially reduce the number of policies written by that insurer covering properties located within a particular geographic region to submit to the commissioner, at least 30 days prior to implementing that action, or 60 days prior to implementing that action if the policies include homeowners’ insurance policies, reduce, within the first 12 months after a declared disaster, the total number of its homeowners’ insurance policies in force by 20% or more, as specified, to submit to the commissioner, 60 days prior to implementing that action, a plan for the orderly reduction of volume of policies written and would the total number of its homeowners’ insurance policies in that area. The bill would also specify the information that must be included in the plan. The bill would provide that the commissioner would have 30 days to approve or disapprove the plan submitted. The bill would require the commissioner to approve the plan if the insurer demonstrates that the material reduction would be accomplished in a manner that minimizes market disruption in areas of material reduction. The bill would also require the commissioner to assess the impact of the planned withdrawal from potentially impacted counties.

(4)The bill would also express the intent of the Legislature to enact legislation that would require insurance companies to provide mitigation discounts and continued coverage to homeowners who employ wildlife mitigation techniques.

(3) Existing law authorizes the commissioner to require information on specified topics from insurers by means of a data call.
This bill would direct the Department of Insurance to conduct a data call on wildfire and fire loss experience from insurers writing residential property insurance policies.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 675.1 of the Insurance Code is amended to read:

675.1.
 (a) In the case of a total loss to the primary insured structure under a residential policy policy of residential property insurance subject to Section 675, the following provisions apply:

(a)

(1) If reconstruction of the primary insured structure has not been completed by the time of policy renewal, the insurer, prior to or at the time of renewal, and after consultation by the insurer or its representative with the insured as to what limits and coverages might or might not be needed, shall adjust the limits and coverages, write an additional policy, or attach an endorsement to the policy that reflects the change, if any, in the insured’s exposure to loss. The insurer shall adjust the premium charged to reflect any change in coverage.

(b)

(2) The insurer shall not cancel coverage while the primary insured structure is being rebuilt, except for the reasons specified in subdivisions (a) to (e), inclusive, of Section 676. The insurer shall not use the fact that the primary insured structure is in damaged condition as a result of the total loss as the sole basis for a decision to cancel the policy pursuant to subdivision (e) of that section.

(c)

(3) Except for the reasons specified in subdivisions (a) to (e), inclusive, of Section 676, the insurer shall offer to, at least once, renew the policy in accordance with the provisions of subdivision (a) paragraph (1) if the total loss to the primary insured structure was caused by a disaster, as defined in subdivision (b) of Section 1689.14 of the Civil Code, and the loss was not also due to the negligence of the insured.

(d)

(4) With respect to policies of residential earthquake insurance, the California Earthquake Authority, or any insurer, including a participating insurer, as defined in subdivision (i) of Section 10089.5, may defer its initial implementation of this section until no later than October 1, 2005.

(e)

(5) With respect to a residential earthquake insurance policy issued by the California Earthquake Authority, the following provisions apply:

(1)

(A) The participating insurer that issued the underlying policy of residential property insurance on the primary insured structure shall consult with the insured as to what limits and coverages might or might not be needed as required by subdivision (a). paragraph (1).

(2)

(B) The California Earthquake Authority, in lieu of meeting the requirements of subdivision (a), paragraph (1), shall establish procedures and practices that allow it to reasonably accommodate the needs and interests of consumers in maintaining appropriate earthquake insurance coverage, within the statutory and regulatory limitations on the types of insurance coverages and the coverage limits of the policies that the authority may issue.

(f)It is the intent of the Legislature to clarify that this section applies, but is not limited to, all insured properties located within a county for which a state of emergency has been declared by the President of the United States or the Governor, or for which a local emergency has been declared by the executive officer or governing body of a city, county, or city and county.

(b) An insurer shall not cancel, refuse to renew, or include a surcharge or an increase in the premium of, a policy of residential property insurance based solely on the fact that the insured structure is located in a county in which one or more catastrophic events have occurred for which a state of emergency has been declared by the Governor, the President of the United States, the executive officer or governing body of a city, county, or city and county, or a nationally recognized catastrophe loss index provider, for one year after the declaration of a state of emergency. This prohibition applies to all residences in the counties affected by the declared emergency.

SEC. 2.Section 676 of the Insurance Code is amended to read:
676.

After a policy specified in Section 675 has been in effect for 60 days, or, if the policy is a renewal, effective immediately, no notice of cancellation or nonrenewal shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:

(a)Nonpayment of premium, including nonpayment of any additional premiums, calculated in accordance with the current rating manual of the insurer, justified by a physical change in the insured property or a change in its occupancy or use.

(b)Conviction of the named insured of a crime having as one of its necessary elements an act increasing any hazard insured against.

(c)Discovery of fraud or material misrepresentation by either of the following:

(1)The insured or his or her representative in obtaining the insurance.

(2)The named insured or his or her representative in pursuing a claim under the policy.

(d)Discovery of grossly negligent acts or omissions by the insured or his or her representative substantially increasing any of the hazards insured against.

(e)Physical changes in the insured property which result in the property becoming uninsurable.

SEC. 3.SEC. 2.

 Section 758.8 is added to the Insurance Code, to read:

758.8.
 (a)An insurer that intends to materially reduce the number of policies written by that insurer covering properties located within a particular geographic region shall submit to the commissioner, at least 30 days prior to implementing that action, or 60 days prior to implementing that action if the policies include homeowners’ insurance policies, a plan for the orderly reduction of the volume of policies written that does An insurer that intends to reduce, within the first 12 months after a declared disaster, the total number of its homeowners’ insurance policies in force, for properties within the same ZIP Code and located in this state, by 20 percent or more, shall submit to the commissioner, 60 days prior to implementing that action, a plan for the orderly reduction of the total number of its homeowners’ insurance policies in that area. This section applies to an insurer if its anticipated total number of homeowners’ insurance policies in force for properties within the same ZIP Code and located in this state, at any time during the 12 months after a declared disaster and after the planned reduction, will be at least 20 percent less than its total number of homeowners’ insurance policies in force in that ZIP Code and located in this state on January 1 of the year in which the disaster occurs. The plan shall do all of the following:

(1)Describes

(a) Describe the contemplated actions.

(2)Sets

(b) Set forth the reasons for those actions.

(3)Describes

(c) Describe the measures the insurer intends to take in order to minimize market disruption.

(4)Provides

(d) Provide other information that the commissioner requires.

(b)The commissioner shall have 30 days to approve or disapprove the plan submitted pursuant to subdivision (a). The commissioner shall approve the plan if the insurer demonstrates that the material reduction will be accomplished in a manner that minimizes market disruption in areas of material reduction. In reviewing each plan submitted, the commissioner shall assess the impact of the planned withdrawal from potentially impacted counties.

SEC. 4.

It is the intent of the Legislature to enact legislation that would require insurance companies to provide mitigation discounts and continued coverage to homeowners who employ wildlife mitigation techniques.

SEC. 3.

 The Department of Insurance shall conduct a data call on wildfire and fire loss experience from insurers writing residential property insurance policies.