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AB-740 Property insurance: fire hazard severity zones.(2019-2020)

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Date Published: 07/02/2019 09:00 PM
AB740:v93#DOCUMENT

Amended  IN  Senate  July 02, 2019
Amended  IN  Senate  June 18, 2019
Amended  IN  Assembly  May 28, 2019
Amended  IN  Assembly  May 20, 2019
Amended  IN  Assembly  April 12, 2019
Amended  IN  Assembly  April 01, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 740


Introduced by Assembly Member Burke
(Coauthors: Assembly Members Aguiar-Curry, Cooper, Flora, Gallagher, Low, Quirk, and Wood and Quirk)

February 19, 2019


An act to add Article 12 (commencing with Section 16429.5) to Chapter 2 of Part 2 of Division 4 of Title 2 of the Government Code, relating to wildfires, making an appropriation therefor, amend Section 10094.2 of the Insurance Code, relating to insurance, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


AB 740, as amended, Burke. Wildfires: California Catastrophic Wildfire Victims Fund. Property insurance: fire hazard severity zones.
Under existing law, the California FAIR Plan Association is a joint reinsurance association formed by state insurers licensed to write and engaged in writing basic property insurance within this state to assist persons in securing basic property insurance and to formulate and administer a program and FAIR Plan for the equitable apportionment among insurers of basic property insurance. Existing law requires each insurer to participate in the writings, expenses, and profits and losses of the association in the proportion that its premiums written bear to the aggregate premiums written by all insurers in the program, as specified, but requires the plan to provide for a method for insurers who voluntarily write basic property insurance on risks located in areas designated as brush hazard areas to be proportionately relieved of the liability to participate in the plan.
This bill would add to the insurers that are proportionately relieved of the liability to participate in the FAIR Plan those voluntarily writing basic property insurance on risks in high or very high fire hazard severity zones, as determined and mapped by the Department of Forestry and Fire Protection. The bill would also revise the similar provision relating to areas designated as brush hazard areas by making it specifically applicable to areas so designated at the time coverage begins.
This bill would declare that it is to take effect immediately as an urgency statute.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations, while local publicly owned electric utilities are under the direction of their governing boards. Existing law authorizes the commission to fix just and reasonable rates and charges for electrical corporations.

Existing law, until January 1, 2003, authorizes the Department of Water Resources to purchase electricity on behalf of ratepayers of electrical corporations through the issuance of revenue bonds secured by a rate component charged to those ratepayers.

Existing law, under specific circumstances, authorizes the commission, upon application by an electrical corporation, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, that are incurred or expected to be incurred by an electrical corporation, excluding fines and penalties, related to wildfires, as provided.

This bill would establish the California Catastrophic Wildfire Victims Fund, the purpose of which would be to ensure that victims of catastrophic wildfires are compensated in a timely manner, to provide reimbursements to victims for a portion of those wildfire losses, and to avoid lengthy legal proceedings. The bill would continuously appropriate the moneys in the fund for that purpose, thereby making an appropriation. The bill would specify the funding sources for the fund, including, among other sources, an annual transfer of $500,000,000 from the General Fund and revenues from the continued collection of the rate component used to secure the revenue bonds issued by the Department of Water Resources after the maturity of the revenue bonds referenced above. The bill would require the first $500,000,000 deposited into the fund to be used to cover claims from victims of wildfires occurring in the calendar years 2017 and 2018. The bill would authorize an insurer, an insured who becomes underinsured due to construction demand surge, and a local government to seek reimbursement from the fund, as provided. The bill would require an electrical corporation to maintain minimum commercial insurance coverage, as specified, and to retain $100,000,000 in accessible cash for self insurance. The bill would require an electrical corporation to reimburse the fund, as provided, if the electrical corporation is determined to be responsible for a wildfire by the Department of Forestry and Fire Protection and that determination is affirmed by the Public Utilities Commission. The bill would establish the California Catastrophic Wildfire Victims Fund Commission within the Treasurer’s office, which would be composed of 11 members, including the Treasurer, the Insurance Commissioner, the Director of the Department of Forestry and Fire Protection, and 8 members appointed by the Governor, as specified, who would serve staggered, 3-year terms. The bill would require the California Catastrophic Wildfire Victims Fund Commission to oversee the fund.

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: 2/3   Appropriation: YESNO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 10094.2 of the Insurance Code is amended to read:

10094.2.
 Notwithstanding subdivision (c) of Section 10095, the facility shall, pursuant to regulations adopted by the commissioner, provide for a method whereby insurers who voluntarily write basic property insurance on risks located in areas designated at the time coverage begins as brush hazard areas by the Insurance Services Office (ISO) or designated as high fire hazard severity zones as determined and mapped by the Department of Forestry and Fire Protection, or very high fire hazard severity zones as determined and mapped by the Department of Forestry and Fire Protection pursuant to Section 51178 of the Government Code will, to that extent, be proportionately relieved of the liability to participate in a plan adopted pursuant to this chapter. Furthermore, notwithstanding subdivision (c) of Section 10095, the facility shall, pursuant to regulations adopted by the commissioner, provide for a method whereby insurers who voluntarily write basic property insurance or business owners package insurance on risks located in areas designated as inner-city areas by the commissioner will, to that extent, be proportionately relieved of the liability to participate in a plan adopted pursuant to this chapter. Nothing in this chapter shall This chapter does not preclude adoption of a plan or plans to allow proportionate credit for voluntary writings in other areas or for other classes of insurance.

SEC. 2.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to provide assistance as soon as possible to homeowners in high and very high fire hazard severity zones who are having difficulty obtaining insurance, it is necessary that this act take effect immediately.