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

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Date Published: 09/21/2018 09:00 PM
SB824:v93#DOCUMENT

Senate Bill No. 824
CHAPTER 616

An act to amend Section 675.1 of, and to add Article 10.4 (commencing with Section 929) to Chapter 1 of Part 2 of Division 1 of, the Insurance Code, relating to insurance.

[ Approved by Governor  September 21, 2018. Filed with Secretary of State  September 21, 2018. ]

LEGISLATIVE COUNSEL'S DIGEST


SB 824, Lara. 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 prohibit, subject to certain exceptions, an insurer from canceling or refusing to renew a policy of residential property insurance for one year after the declaration of a state of emergency based solely on the fact that the insured structure is located in an area in which a wildfire has occurred, with respect to an insured property located within or adjacent to the fire perimeter, as specified.
(2) Existing law creates the Department of Insurance, headed by the Insurance Commissioner, and prescribes the department’s and commissioner’s powers and duties. Existing law authorizes the commissioner to require reports from insurers concerning risks and solvency, and authorizes the commissioner to impose civil penalties for failure to submit reports or data to the commissioner. Under existing law, the acts and orders of the commissioner are subject to a court’s review or other action.
This bill would require an admitted insurer with written California premiums above a specified threshold to submit a report with specified fire risk information on its residential property policies to the commissioner on or before April 1, 2020, and every 2 years thereafter. The bill would require the commissioner to post a report on wildfire risk compiled from the submitted data to the department’s Internet Web site every 2 years. The bill would authorize the commissioner to specify the manner of submission and the format of the report submitted by the insurer and would authorize the commissioner to grant a submission extension to an insurer. The bill would subject an admitted insurer that fails to submit a report to a civil penalty to be fixed by the commissioner, not to exceed $5,000, or $10,000 if the act was willful, and would specify the appeals process. The bill would provide that fire risk information submitted to the commissioner is confidential and not subject to subpoena, as specified.
(3) Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
(4) This bill would incorporate additional changes to Section 675.1 of the Insurance Code proposed by SB 894 to be operative only if this bill and SB 894 are enacted and this bill is enacted last.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 The Legislature finds and declares the following:
(a) Insurance losses due to wildfires are on the rise in California.
(b) The risk of catastrophic wildfires is increasing due to global climate change.
(c) In order to ensure a vibrant and robust insurer marketplace relating to fire risk, it is necessary for the Insurance Commissioner to collect data on fire loss experience from insurers writing residential property insurance, including the Fair Access to Insurance Requirements (FAIR) Plan, and to issue a report summarizing findings from that data collection.

SEC. 2.

 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 policy of residential property insurance subject to Section 675, the following provisions apply:
(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.
(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.
(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 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.
(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.
(5) With respect to a residential earthquake insurance policy issued by the California Earthquake Authority, the following provisions apply:
(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 paragraph (1).
(B) The California Earthquake Authority, in lieu of meeting the requirements of 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.
(b) (1) An insurer shall not cancel or refuse to renew a policy of residential property insurance for a property located in any ZIP Code within or adjacent to the fire perimeter, for one year after the declaration of a state of emergency, as defined in Section 8558 of the Government Code, based solely on the fact that the insured structure is located in an area in which a wildfire has occurred. This prohibition applies to all policies of residential property insurance in effect at the time of the declared emergency.
(2) For the purposes of this section, the fire perimeter shall be determined by the Department of Forestry and Fire Protection in consultation with the Office of Emergency Services. The department shall provide the commissioner with data describing the fire perimeter sufficient for the commissioner to determine which ZIP Codes are within or adjacent to the fire perimeter. The commissioner shall then issue a bulletin to inform insurers which ZIP Codes are subject to this subdivision.
(c) Subdivision (b) does not apply in any of the following circumstances:
(1) If willful or grossly negligent acts or omissions by the named insured, or his or her representatives, are discovered that materially increase any of the risks insured against.
(2) If losses unrelated to the postdisaster loss condition of the property have occurred that would collectively render the risk ineligible for renewal.
(3) If there are physical or risk changes to the insured property beyond the catastrophe-damaged condition of the structures and surface landscape that result in the property becoming uninsurable.
(d) For the purposes of this section, “policy of residential property insurance” has the meaning described in subdivision (a) of Section 10087.

SEC. 2.5.

 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 policy of residential property insurance subject to Section 675, the following provisions apply:
(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.
(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.
(3) Except for the reasons specified in subdivisions (a) to (e), inclusive, of Section 676, the insurer shall offer, for at least the next two annual renewal periods, but no less than 24 months of coverage from the date of the loss, to renew the policy in accordance with 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, the loss was not also due to the negligence of the insured, and losses have not occurred subsequent to the disaster related total loss that relate to physical or risk changes to the insured property that result in the property becoming uninsurable.
(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.
(5) With respect to a residential earthquake insurance policy issued by the California Earthquake Authority, the following provisions apply:
(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 paragraph (1).
(B) The California Earthquake Authority, in lieu of meeting the requirements of 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.
(b) (1) An insurer shall not cancel or refuse to renew a policy of residential property insurance for a property located in any ZIP Code within or adjacent to the fire perimeter, for one year after the declaration of a state of emergency, as defined in Section 8558 of the Government Code, based solely on the fact that the insured structure is located in an area in which a wildfire has occurred. This prohibition applies to all policies of residential property insurance in effect at the time of the declared emergency.
(2) For the purposes of this section, the fire perimeter shall be determined by the Department of Forestry and Fire Protection in consultation with the Office of Emergency Services. The department shall provide the commissioner with data describing the fire perimeter sufficient for the commissioner to determine which ZIP Codes are within or adjacent to the fire perimeter. The commissioner shall then issue a bulletin to inform insurers which ZIP Codes are subject to this subdivision.
(c) Subdivision (b) does not apply in any of the following circumstances:
(1) If willful or grossly negligent acts or omissions by the named insured, or his or her representatives, are discovered that materially increase any of the risks insured against.
(2) If losses unrelated to the postdisaster loss condition of the property have occurred that would collectively render the risk ineligible for renewal.
(3) If there are physical or risk changes to the insured property beyond the catastrophe-damaged condition of the structures and surface landscape that result in the property becoming uninsurable.
(d) For the purposes of this section, “policy of residential property insurance” has the meaning described in subdivision (a) of Section 10087.

SEC. 3.

 Article 10.4 (commencing with Section 929) is added to Chapter 1 of Part 2 of Division 1 of the Insurance Code, to read:
Article  10.4. Wildfire Risk Information Reporting

929.
 (a) (1) On or before April 1, 2020, and every two years thereafter, an admitted insurer with written California premiums totaling ten million dollars ($10,000,000) or more shall submit a report to the commissioner on its residential property experience data for the previous two years for policies written in California.
(2) The premium threshold for reporting shall be increased to twelve million dollars ($12,000,000) for the reports due on April 1, 2026, and shall thereafter be increased every five years by 20 percent of the threshold amount required in the year immediately preceding the increase.
(3) Reports filed on April 1, 2020, shall include data from calendar years 2018 and 2019. Subsequent reports shall likewise include data from the two calendar years immediately preceding the year in which the report is due.
(b) The commissioner may specify, by bulletin, the manner of submission and format of the report required pursuant to subdivision (a). The report shall include the following information reported by individual policy:
(1) Fire- or wildfire-incurred losses, if any, reported by property coverage category and the date of the loss.
(2) The public protection class or its equivalent, if utilized by the insurer.
(3) The specific numerical or other fire risk score and source of fire risk score, if applicable.
(4) Premium.
(5) ZIP Code.
(c) If the commissioner issues a bulletin pursuant to subdivision (b), the initial bulletin shall be posted to the department’s Internet Web site on or before May 1, 2019. Any updated bulletin shall be posted no less than two months before the date that the insurer’s report in which the changes are required is due.
(d) An insurance holding company system, as defined in subdivision (e) of Section 1215, may submit a consolidated report of the information required by this section for all insurers comprising the holding company system.
(e) For the purposes of this section, “policy of residential property insurance” has the meaning described in subdivision (a) of Section 10087.

929.1.
 Information submitted to the commissioner, as required by Section 929, shall be confidential pursuant to subdivision (d) of Section 6254 of the Government Code and exempt from the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). Additionally, that information shall not be subject to subpoena or subpoena duces tecum. Testimony by the commissioner, the commissioner’s staff, an employee of the department, or a person to whom the report required by Section 929 was disclosed, regarding the contents of any report submitted pursuant to Section 929, shall be inadmissible as evidence in a civil proceeding.

929.2.
 (a) The commissioner shall post to the department’s Internet Web site a report on wildfire risk compiled from the data collected pursuant to Section 929.
(b) The report shall be updated every two years to reflect new data submitted by insurers.
(c) The report shall separately provide information each calendar year.

929.3.
 (a) Failure to submit a report pursuant to Section 929 shall subject an admitted insurer to a civil penalty to be fixed by the commissioner, not to exceed five thousand dollars ($5,000) or, if the act was willful, a civil penalty not to exceed ten thousand dollars ($10,000).
(b) An insurer may request, and the commissioner may grant, a 30-day extension, if needed due to unintended or unforeseen delays, to submit the report. If the insurer fails to submit the report within 30 days of a written notice by the commissioner regarding the failure to submit the report, the commissioner may find that the failure to submit the report was willful and increase the civil penalty to an amount not to exceed ten thousand dollars ($10,000).
(c) The penalty imposed by this section shall be enforced by the commissioner and may be appealed by means of a remedy provided by Section 12940, or by Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code. This subdivision is the sole means for enforcement of this section.

SEC. 4.

 The Legislature finds and declares that Section 3 of this act, which adds Section 929.1 to the Insurance Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:
In order to protect proprietary insurer information, it is necessary for information reported to the Insurance Commissioner by insurers pursuant to Section 3 of this act to remain confidential.

SEC. 5.

 Section 2.5 of this bill incorporates amendments to Section 675.1 of the Insurance Code proposed by both this bill and Senate Bill 894. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2019, (2) each bill amends Section 675.1 of the Insurance Code, and (3) this bill is enacted after Senate Bill 894, in which case Section 2 of this bill shall not become operative.