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AB-1522 The Catastrophic Wildfire Insurance Act.(2021-2022)

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Date Published: 09/09/2021 09:00 PM
AB1522:v98#DOCUMENT

Amended  IN  Assembly  September 09, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1522


Introduced by Assembly Member Levine

February 19, 2021


An act to amend Section 675.1 add Chapter 12 (commencing with Section 10109) to Part 1 of Division 2 of the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 1522, as amended, Levine. Property insurance. The Catastrophic Wildfire Insurance Act.
Existing law generally regulates classes of insurance, including residential and commercial property insurance. Existing law requires an admitted insurer with written California premiums totaling $10,000,000 or more, as specified, to submit a biennial report to the Insurance Commissioner on its residential property experience data for the previous 2 years for policies written in California and to include in the report information on fire- or wildfire-incurred losses, as specified. Existing law prohibits an insurer, for one year after the declaration of a state of emergency, from canceling or refusing to renew a residential property insurance policy solely because the property is in an area in which a wildfire occurred.
This bill would create the California Wildfire Insurance Authority to serve as a marketplace for catastrophic wildfire insurance. The bill would require the authority to be formed as a nonprofit entity that is privately funded and publicly managed. The bill would require the Department of Insurance to promulgate regulations to govern the approval and regulation of catastrophic wildfire insurance policies and would prohibit, on and after January 1, 2023, a policy of residential or commercial property insurance from being issued, amended, or renewed by an insurer unless the named insured is offered coverage for loss or damage caused by a catastrophic wildfire. The bill would require an insurer to provide a discount of up to 20% on catastrophic wildfire insurance policy premiums to a residential or commercial property owner who hardens their property and would authorize the policy to contain a deductible. The bill would require the commissioner to approve all catastrophic wildfire insurance policy rates, discounts, and deductibles.
This bill would establish the Catastrophic Wildfire Insurance Fund to provide a stable and ongoing source of reimbursement to participating insurers. The bill would require the fund to be administered as a state-administered reinsurance program and would require the fund to reimburse all participating insurers for losses totaling over $100,000,000 that are incurred each year due to claims filed on catastrophic wildfire insurance policies. Under the bill, the fund would be financed by state contributions, revenue bonds, and assessments.
This bill would establish the California Wildfire Protection Program to provide home inspections for residential property owners who own homes located in high fire risk areas, and to provide recommendations on how to harden those homes to protect against wildfires. Under the bill, the program would offer grants to residential property owners for costs associated with the recommended home hardening improvements.

Existing law generally regulates classes of insurance, including residential property insurance and commercial insurance. Existing law prohibits an insurer from canceling or refusing to renew a policy of residential property insurance for a property located in a ZIP Code within or adjacent to a fire perimeter for one year after the declaration of a state of emergency if the cancellation or nonrenewal is based solely on the fact that the insured structure is located in an area in which a wildfire has occurred.

This bill would additionally prohibit an insurer from canceling or refusing to renew a policy of residential property insurance or commercial insurance based solely on the fact that the insured property is located in a high-risk wildfire area.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

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


SECTION 1.

 Chapter 12 (commencing with Section 10109) is added to Part 1 of Division 2 of the Insurance Code, to read:
CHAPTER  12. The Catastrophic wildfire Insurance Act
Article  1. California Wildfire Insurance Authority

10109.
 The California Wildfire Insurance Authority is hereby created to serve as a marketplace for catastrophic wildfire insurance.

10109.01.
 The authority shall be formed as a nonprofit entity that is privately funded and publicly managed.

Article  2. Catastrophic Wildfire Insurance

10109.10.
 (a) The department shall promulgate regulations to govern the approval and regulation of catastrophic wildfire insurance policies for the California insurance market.
(b) A catastrophic wildfire insurance policy shall be separate and distinct from any coverage included in a traditional residential property or commercial insurance policy and the policy shall be offered by an insurer in addition to a traditional homeowners’ or commercial insurance policy.

10109.11.
 A catastrophic wildfire insurance policy shall cover loss or damage caused by a catastrophic wildfire, as designated by the Department of Forestry and Fire Protection, or by a wildfire that is included in a state of emergency declared by the Governor.

10109.12.
 (a) On and after January 1, 2023, a policy of residential or commercial property insurance shall not be issued, amended, or renewed by an insurer unless the named insured is offered coverage for loss or damage caused by a catastrophic wildfire.
(b) Subject to Section 10109.13, an insurer shall provide a discount of up to 20 percent on catastrophic wildfire insurance policy premiums to a residential or commercial property owner who hardens their property.
(1) The commissioner, in consultation with representatives of the insurance industry and consumer advocacy groups, shall determine the hardening improvements that shall be considered in order to qualify for a discount on premiums.
(2) An insurer may require a certified inspector to examine a residential or commercial property to determine whether the property contains qualified hardening improvements.
(c) A catastrophic wildfire insurance policy may contain a deductible.

10109.13.
 The commissioner shall approve all catastrophic wildfire insurance policy rates, discounts, and deductibles.

Article  3. Catastrophic Wildfire Insurance Fund

10109.20.
 The Catastrophic Wildfire Insurance Fund is hereby established to provide a stable and ongoing source of reimbursement to participating insurers. The fund shall be administered as part of a state-administered reinsurance program.

10109.21.
 The fund shall reimburse all participating insurers for losses totaling over one hundred million dollars ($100,000,000) that are incurred each year due to claims filed on catastrophic wildfire insurance policies.

10109.22.
 The fund shall be financed by state contributions, revenue bonds, and assessments.

Article  4. Wildfire Protection Program

10109.30.
 The California Wildfire Protection Program is hereby established to provide home inspections for residential property owners who own homes located in high fire risk areas, and to provide recommendations to those residential property owners on how to harden their homes to protect against wildfires. The program shall offer grants to residential property owners for costs associated with the recommended home hardening improvements.

10109.31.
 The administrators of the program shall consult and coordinate with state and local fire fighting, fire protection, and fire mitigation entities to develop a list of recommended home hardening improvements.

Article  5. Regulations

10109.40.
 The department shall promulgate regulations to govern the California Wildfire Insurance Authority, catastrophic wildfire insurance policies, the Catastrophic Wildfire Insurance Fund, and the California Wildfire Protection Program.

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 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, before 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 the named insured’s 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)An insurer shall not cancel or refuse to renew a policy of residential property insurance or commercial insurance based solely on the fact that the insured property is located in a high-risk wildfire area, as defined by the Department of Forestry and Fire Protection.

(e)For purposes of this section:

(1)“Commercial insurance” has the meaning described in subdivision (b) of Section 675.5.

(2)“Policy of residential property insurance” has the meaning described in subdivision (a) of Section 10087.