Bill Text: CA AB2064 | 2013-2014 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Earthquake insurance: mandatory offer.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2014-09-18 - Chaptered by Secretary of State - Chapter 419, Statutes of 2014. [AB2064 Detail]
Download: California-2013-AB2064-Amended.html
Bill Title: Earthquake insurance: mandatory offer.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2014-09-18 - Chaptered by Secretary of State - Chapter 419, Statutes of 2014. [AB2064 Detail]
Download: California-2013-AB2064-Amended.html
BILL NUMBER: AB 2064 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 21, 2014
INTRODUCED BY Assembly Member Cooley
FEBRUARY 20, 2014
An act to amend Sections 10081, 10085, 10086, 10089.6,
and 10089.26 of, to add Sections 10081.1 and 10089.42 to, and to
repeal and add Sections 10089.28 and 10089.41 of,
amend, add, and repeal Sections 10083 and 10086 of, to amend, repeal,
and add Sections 10083, 10086, 10089.6, 10089.26, and
10089.28 of, and to add Section 10089.42 to, the Insurance
Code, relating to earthquake insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2064, as amended, Cooley. Earthquake insurance: mandatory
offer.
Existing law prohibits a policy of residential property insurance
from being issued or delivered or initially renewed in this state
unless the named insured is offered coverage for loss or damage
caused by an earthquake, as provided, and, if the offer of
earthquake coverage is accepted, requires the insurer to provide
certain disclosures based on whether the policy was issued by the
California Earthquake Authority (CEA).
Existing law created the CEA, to be administered under the
authority of the Insurance Commissioner, and authorized it to
transact insurance in this state as necessary to sell policies of
basic residential earthquake insurance in the manner provided. The
CEA has no authority to transact any other type of insurance
business. The CEA's operating expenses are capped at 3% of its
premium income.
This bill would revise and recast these provisions by
instead revising the disclosure language an insurer is
required to use in offering earthquake coverage and making the
contents of that disclosure language dependent upon whether the
insurer is a member of the CEA or not and by requiring insurers
who are members of the CEA to provide their insureds with specified
disclosures with regard to coverage of losses, the CEA's liability
limitations, and premiums concurrent with the issuance or renewal by
the CEA of a residential earthquake insurance policy. The bill would
also prohibit member insurers from issuing, delivering, or renewing a
policy of residential property insurance in this state, unless the
named insured is provided notice of
information on the availability of residential earthquake
insurance from the CEA within 60 days of issuance or renewal of the
insured's residential insurance policy, as provided. The CEA would be
required to prepare the forms of notice the
information required for use by member insurers and submit the
forms to the commissioner for approval. The insurers would be
authorized to provide the notice electronically or by mail.
The bill would provide that member insurers that fulfil the specified
notice requirements would be in compliance with the earthquake
insurance provisions applicable to the issuance, delivery, and
renewal of a policy of residential property insurance.
This bill would increase the cap on the CEA's operating expenses
to not more than 5% of its premium income , and exclude certain
expenses and costs from being classified as operating expenses
. The bill would also require that a CEA residential earthquake
insurance policy be effective upon receipt by the member insurer of
both the completed CEA-approved application for the policy, signed by
the applicant, and either the annual premium or the first
installment of the annual premium.
This bill would also make conforming changes.
make these provisions operative on July 1, 2015.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10081 of the Insurance Code
is amended to read:
10081. Except as provided in Section 10081.1, a policy of
residential property insurance shall not be issued or delivered or,
with respect to policies in effect on the effective date of this
chapter, initially renewed in this state by any insurer unless the
named insured is offered coverage for loss or damage caused by the
peril of earthquake as provided in this chapter. That coverage may be
provided in the policy of residential property insurance itself,
either by specific policy provision or endorsement, or in a separate
policy or certificate of insurance that specifically provides
coverage for loss or damage caused by the peril of earthquake alone
or in combination with other perils.
SEC. 2. Section 10081.1 is added to the
Insurance Code, to read:
10081.1. Section 10081 does not apply to any insurer that
participates in the California Earthquake Authority pursuant to
Chapter 8.6 (commencing with Section 10089.5). Each insurer
participating in the authority shall provide notice to all of its
residential property insurance policyholders of the availability of
earthquake insurance coverage in the manner required by Section
10089.42.
SEC. 3. Section 10085 of the Insurance Code is
amended to read:
10085. If the insurer establishes proof of mailing or delivery of
the offer that is required pursuant to Section 10081 and the offer
of earthquake coverage is not accepted by the named insured within 30
days from the date of mailing or delivery of the offer, there shall
be a conclusive presumption that the named insured elected not to
accept the coverage. An election, actual or presumed, by any named
insured shall be binding upon any other person insured or any other
party having an insurable interest in the insured property.
SEC. 4. Section 10086 of the Insurance Code, as
amended by Section 14 of Chapter 369 of the Statutes of 2013, is
amended to read:
10086. (a) If an offer of earthquake coverage, made pursuant to
Section 10081, is accepted, the coverage shall be continued at the
applicable rates and conditions for the policy term, provided the
policy of residential property insurance is not terminated by the
named insured or insurer.
(1) At any renewal, an insurer may modify the terms and conditions
of an existing policy, rider, or endorsement providing coverage
against loss or damage caused by the peril of earthquake if the
modified terms and conditions provide the minimum coverages required
by Section 10089.
(2) An insurer that modifies the terms and conditions of an
existing policy, rider, or endorsement shall provide the insured with
the renewal notice in a stand-alone disclosure document stating the
changes in the terms and conditions of the insured's existing policy,
rider, or endorsement. The offer of renewal may be made
electronically pursuant to Section 38.5. Proof of mailing of the
disclosure document by first-class mail to a named insured at the
mailing address shown on the policy or application, or proof
consistent with Section 38.5 that the offer of renewal of coverage
was sent to the named insured or applicant by electronic
transmission, creates a conclusive presumption that the disclosure
document was provided. The disclosure shall include the following
statement in 14-point boldface type:
"THE COVERAGE IN THE POLICY WE ARE OFFERING YOU WITH THIS RENEWAL
HAS BEEN REDUCED, AND SUBSTANTIALLY DIFFERS FROM THE COVERAGES
PROVIDED BY YOUR HOMEOWNERS' POLICY. INSURANCE COMPANIES ARE ALLOWED
TO RENEW EARTHQUAKE INSURANCE POLICIES WITH COVERAGE THAT IS REDUCED
FROM THE COVERAGE YOU PREVIOUSLY PURCHASED. YOU MAY REQUEST A SAMPLE
COPY OF THIS NEW POLICY TO REVIEW PRIOR TO MAKING A DECISION TO
ACCEPT THIS RENEWAL, AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE COPY SHALL NOT CHANGE
OR EXTEND THE POLICY EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS NOTICE."
The commissioner shall approve the form of the summary at the time
he or she approves the policy. The summary shall include the
information contained in subdivision (a) of Section 10083, and may be
included with the renewal notice in standard type.
The commissioner may approve substantially similar disclosure
forms if necessary to accurately disclose relevant information to the
policyholder. The commissioner may also approve disclosure forms
substantially similar to the disclosure statement required by Section
10083 if necessary to accurately disclose relevant information to
the policyholder.
(b) If the offer of earthquake coverage made pursuant to Section
10081 is not accepted, the insurer or any affiliated insurer shall be
required on an every other year basis to offer earthquake coverage
in connection with any continuation, renewal, or reinstatement of the
policy following any lapse thereof, or with respect to any other
policy that extends, changes, supersedes, or replaces the policy of
residential property insurance. The offer may be made electronically
pursuant to Section 38.5.
(c) Nothing in this section shall preclude the named insured from
terminating the earthquake coverage at any time.
(d) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date.
SECTION 1. Section 10083 of the
Insurance Code , as amended by Section 12 of Chapter 369
of the Statutes of 2013, is amended to read:
10083. (a) The offer of coverage required by Section 10081 may be
made prior to, concurrent with, or within 60 days following the
issuance or renewal of a residential property insurance policy. If
the offer of coverage is mailed to the named insured or applicant, it
shall be mailed to the mailing address shown on the policy of
residential property insurance or on the application. The offer may
be made electronically pursuant to Section 38.5. The offer of
earthquake coverage shall contain the following language in at least
10-point boldface type:
YOUR POLICY DOES NOT PROVIDE COVERAGE AGAINST THE PERIL OF
EARTHQUAKE.
CALIFORNIA LAW REQUIRES THAT EARTHQUAKE COVERAGE BE OFFERED TO YOU
AT YOUR OPTION.
WARNING: THESE COVERAGES MAY DIFFER SUBSTANTIALLY FROM AND PROVIDE
LESS PROTECTION THAN THE COVERAGE PROVIDED BY YOUR HOMEOWNERS'
INSURANCE POLICY. THERE ARE EXCLUSIONS AND LIMITATIONS SUCH AS
OUTBUILDINGS, SWIMMING POOLS, MASONRY FENCES, AND MASONRY CHIMNEYS.
THIS DISCLOSURE FORM CONTAINS ONLY A GENERAL DESCRIPTION OF COVERAGES
AND IS NOT PART OF YOUR EARTHQUAKE INSURANCE POLICY. ONLY THE
SPECIFIC PROVISIONS OF YOUR POLICY WILL DETERMINE WHETHER A
PARTICULAR LOSS IS COVERED AND, IF SO, THE AMOUNT PAYABLE.
THE COVERAGE, SUBJECT TO POLICY PROVISIONS, MAY BE PURCHASED AT
ADDITIONAL COST ON THE FOLLOWING TERMS:
(A) AMOUNT OF DWELLING COVERAGE: ____
(B) APPLICABLE DEDUCTIBLE: ____ IF YOUR LOSS IS BELOW THIS AMOUNT,
YOU MAY NOT RECEIVE ANY PAYMENT FROM YOUR COVERAGE.
YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO
HOW THE DEDUCTIBLE APPLIES TO THE MARKET VALUE OF YOUR COVERAGE, THE
INSURED VALUE OF YOUR COVERAGE, OR THE REPLACEMENT VALUE OF YOUR
COVERAGE.
(C) CONTENTS COVERAGE: ____
IF YOUR LOSS DOES NOT EXCEED THE DEDUCTIBLE FOR THE DWELLING, YOU
WILL NOT RECEIVE ANY PAYMENT FOR THIS COVERAGE.
YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO
HOW THE DEDUCTIBLE APPLIES TO THE AMOUNT YOU RECEIVE PURSUANT TO THIS
COVERAGE.
(D) ADDITIONAL LIVING EXPENSES: ____
(E) RATE OR PREMIUM: ____
YOU MUST ASK THE COMPANY TO ADD EARTHQUAKE COVERAGE WITHIN 30 DAYS
FROM THE DATE OF MAILING OF THIS NOTICE OR IT SHALL BE CONCLUSIVELY
PRESUMED THAT YOU HAVE NOT ACCEPTED THIS OFFER.
THIS COVERAGE SHALL BE EFFECTIVE ON THE DAY YOUR ACCEPTANCE OF
THIS OFFER IS RECEIVED BY US.
(b) When the insurer, agent, or broker establishes delivery of the
disclosure form by obtaining the signature of the applicant or
insured, or when an insurer, agent, or broker provides the applicant
with the disclosure form and the applicant does not return a signed
acknowledgment of receipt within 60 days of the date it was provided,
there shall be a conclusive presumption that the insurer, agent, or
broker has complied with the disclosure requirements of this section.
(c) The offer may contain additional provisions not in conflict
with or in derogation of this section.
(d) The commissioner may only approve modifications to the
language prescribed in subdivision (a) if all of the following
conditions are met:
(1) The modifications are not in conflict with or in derogation of
any provision of this section or Section 10089.
(2) The modifications are necessary to ensure that the disclosure
statement accurately reflects the coverage actually provided by the
policy being offered.
(3) The modifications are strictly limited to necessary changes so
that the modified disclosure statement is otherwise identical to the
disclosure statement prescribed in this section.
(e) Use of the language prescribed by this section, or modified
language approved pursuant to subdivision (d), shall constitute
compliance with the requirements of Section 10081 by an insurer
subject thereto.
(f) This section shall remain in effect only until
January 1, 2019, July 1, 2015, and as of that
date is repealed, unless a later enacted statute, that is enacted
before January 1, 2019, July 1, 2015,
deletes or extends that date.
SEC. 2. Section 10083 is added to the
Insurance Code , to read:
10083. (a) The offer of coverage required by Section 10081 may be
made prior to, concurrent with, or within 60 days following the
issuance or renewal of a residential property insurance policy. If
the offer of coverage is mailed to the named insured or applicant, it
shall be mailed to the mailing address shown on the policy of
residential property insurance or on the application. The offer may
be made electronically pursuant to Section 38.5.
(1) If the offer is made by a nonparticipating insurer as defined
in Section 10089.5, the offer of earthquake coverage shall contain
all of the following language in at least 10-point boldface type:
"Your property; renters; homeowners; condominium; townhouse;
dwelling; landlord; or other term that may describe the type of
companion policy] policy does not cover earthquake damage to your
home or its contents. To cover earthquake damage to your home and its
contents you need to purchase a separate earthquake insurance
policy. The coverage provided by an earthquake insurance policy is
different from, and typically more limited than, the coverage
provided by your property; renters; homeowners; condominium;
townhouse; dwelling; landlord; or other term that may describe the
type of companion policy] policy. California law requires insurance
companies to offer earthquake insurance in conjunction with a
residential property insurance policy. If you do not accept the offer
of earthquake insurance below within 30 days of the mailing of this
notice, your insurance company may presume that you have not accepted
this offer of earthquake insurance.
You may purchase earthquake insurance coverage, subject to policy
provisions, at additional cost on all of the following terms:
(A) Amount of Dwelling Coverage Insurers may reference Building
Property coverage if a Common Interest Development policy.]:
___________________
(B) Applicable Deductible: ___________________ If your loss is
below this amount, you may not receive any payment for your loss.
(C) Contents Coverage Insurers may reference Personal Property as
that term is in the policy.]: Insurers should include and explain
briefly how the deductible works. Some variation is allowed, but
samples include:
For a Homeowners Policy, the dwelling deductible applies to
Contents Coverage. Nothing will be paid until the dwelling deductible
is met by damage to Coverage A and Coverage B property.
For Renters Policies and Common Interest Development Policies, a
$750 deductible applies to Contents Coverage.]
(D) Additional Living Expenses Insurers may reference Loss of
Use.]: Insurers shall explain briefly if there is a deductible and
how much it is.]
(E) Estimated Annual Premium:_______________
Contact your insurance agent or your insurance company to obtain
details regarding this offer of earthquake insurance and other
coverage options."
(2) If the offer is made by a participating insurer as defined by
Section 10089.5, the offer of earthquake coverage shall contain all
of the following language in at least 10-point boldface type:
"Your property; renters; homeowners; condominium; townhouse;
dwelling; landlord; or other term that may describe the type of
companion policy] policy does not cover earthquake damage to your
home or its contents. To cover earthquake damage to your home and its
contents you need to purchase a separate earthquake insurance
policy. The coverage provided by an earthquake insurance policy is
different from, and typically more limited than, the coverage
provided by your property; renters; homeowners; condominium;
townhouse; dwelling; landlord; or other term that may describe the
type of companion policy] policy. California law requires insurance
companies to offer earthquake insurance in conjunction with a
residential property insurance policy. If you do not accept the offer
of earthquake insurance below within 30 days of the mailing of this
notice, your insurance company may presume that you have not accepted
this offer of earthquake insurance.
You may purchase earthquake insurance coverage, subject to policy
provisions, at additional cost on all of the following terms:
(A) Amount of Dwelling Coverage Insurers may reference Building
Property coverage if a Common Interest Development policy.]:
___________________
(B) Applicable Deductible: ___________________ If your loss is
below this amount, you may not receive any payment for your loss.
(C) Contents Coverage Insurers may reference Personal Property as
that term is in the policy.]: Insurers should include and explain
briefly how the deductible works. Some variation is allowed, but
samples include:
For a Homeowners Policy, the dwelling deductible applies to
Contents Coverage. Nothing will be paid until the dwelling deductible
is met by damage to Coverage A and Coverage B property.
For Renters Policies and Common Interest Development Policies, a
$750 deductible applies to Contents Coverage.]
(D) Additional Living Expenses Insurers may reference Loss of
Use.]: Insurers shall explain briefly if there is a deductible and
how much it is.]
(E) Estimated Annual Premium:_______________
For an additional premium, you can choose California Earthquake
Authority (CEA) coverage options such as higher limits for contents
or additional living expenses coverages, increased building code
upgrade limits, or a lower deductible. You can also choose to buy
certain CEA coverages separately.
Contact your insurance agent or your insurance company to obtain
details regarding this offer of earthquake insurance and other
coverage options."
(b) When the insurer, agent, or broker establishes delivery of the
disclosure form by obtaining the signature of the applicant or
insured, or when an insurer, agent, or broker provides the applicant
with the disclosure form and the applicant does not return a signed
acknowledgment of receipt within 60 days of the date it was provided,
there shall be a conclusive presumption that the insurer, agent, or
broker has complied with the disclosure requirements of this section.
(c) The offer may contain additional provisions not in conflict
with or in derogation of this section.
(d) The commissioner may only approve modifications to the
language prescribed in subdivision (a) if all of the following
conditions are met:
(1) The modifications are not in conflict with or in derogation of
any provision of this section or Section 10089.
(2) The modifications are necessary to ensure that the disclosure
statement accurately reflects the coverage actually provided by the
policy being offered.
(3) The modifications are strictly limited to necessary changes so
that the modified disclosure statement is otherwise identical to the
disclosure statement prescribed in this section.
(e) Use of the language prescribed by this section, or modified
language approved pursuant to subdivision (d), shall constitute
compliance with the requirements of Section 10081 by an insurer
subject to the requirements.
(f) This section shall become operative on July 1, 2015.
(g) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date.
SEC. 3. Section 10083 of the Insurance
Code , as added by Section 13 of Chapter 369 of the
Statutes of 2013, is amended to read:
10083. (a) The offer of coverage required by Section 10081 may be
made prior to, concurrent with, or within 60 days following the
issuance or renewal of a residential property insurance policy. If
the offer of coverage is mailed to the named insured or applicant, it
shall be mailed to the mailing address shown on the policy of
residential property insurance or on the application. The
offer of earthquake coverage shall contain the following language in
at least 10-point boldface type:
YOUR POLICY DOES NOT PROVIDE COVERAGE AGAINST THE PERIL OF
EARTHQUAKE.
CALIFORNIA LAW REQUIRES THAT EARTHQUAKE COVERAGE BE OFFERED TO YOU
AT YOUR OPTION.
WARNING: THESE COVERAGES MAY DIFFER SUBSTANTIALLY FROM AND PROVIDE
LESS PROTECTION THAN THE COVERAGE PROVIDED BY YOUR HOMEOWNERS'
INSURANCE POLICY. THERE ARE EXCLUSIONS AND LIMITATIONS SUCH AS
OUTBUILDINGS, SWIMMING POOLS, MASONRY FENCES, AND MASONRY CHIMNEYS.
THIS DISCLOSURE FORM CONTAINS ONLY A GENERAL DESCRIPTION OF COVERAGES
AND IS NOT PART OF YOUR EARTHQUAKE INSURANCE POLICY. ONLY THE
SPECIFIC PROVISIONS OF YOUR POLICY WILL DETERMINE WHETHER A
PARTICULAR LOSS IS COVERED AND, IF SO, THE AMOUNT PAYABLE.
THE COVERAGE, SUBJECT TO POLICY PROVISIONS, MAY BE PURCHASED AT
ADDITIONAL COST ON THE FOLLOWING TERMS:
(A) AMOUNT OF DWELLING COVERAGE: ____
(B) APPLICABLE DEDUCTIBLE: ____ IF YOUR LOSS IS BELOW THIS AMOUNT,
YOU MAY NOT RECEIVE ANY PAYMENT FROM YOUR COVERAGE.
YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO
HOW THE DEDUCTIBLE APPLIES TO THE MARKET VALUE OF YOUR COVERAGE, THE
INSURED VALUE OF YOUR COVERAGE, OR THE REPLACEMENT VALUE OF YOUR
COVERAGE.
(C) CONTENTS COVERAGE: ____
IF YOUR LOSS DOES NOT EXCEED THE DEDUCTIBLE FOR THE DWELLING, YOU
WILL NOT RECEIVE ANY PAYMENT FOR THIS COVERAGE.
YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO
HOW THE DEDUCTIBLE APPLIES TO THE AMOUNT YOU RECEIVE PURSUANT TO THIS
COVERAGE.
(D) ADDITIONAL LIVING EXPENSES: ____
(E) RATE OR PREMIUM: ____
YOU MUST ASK THE COMPANY TO ADD EARTHQUAKE COVERAGE WITHIN 30 DAYS
FROM THE DATE OF MAILING OF THIS NOTICE OR IT SHALL BE CONCLUSIVELY
PRESUMED THAT YOU HAVE NOT ACCEPTED THIS OFFER.
THIS COVERAGE SHALL BE EFFECTIVE ON THE DAY YOUR ACCEPTANCE OF
THIS OFFER IS RECEIVED BY US.
(1) If the offer is made by a nonparticipating insurer as defined
in Section 10089.5, the offer of earthquake coverage shall contain
all of the following language in at least 10-point boldface type:
"Your property; renters; homeowners; condominium; townhouse;
dwelling; landlord; or other term that may describe the type of
companion policy] policy does not cover earthquake damage to your
home or its contents. To cover earthquake damage to your home and its
contents you need to purchase a separate earthquake insurance
policy. The coverage provided by an earthquake insurance policy is
different from, and typically more limited than, the coverage
provided by your property; renters; homeowners; condominium;
townhouse; dwelling; landlord; or other term that may describe the
type of companion policy] policy. California law requires insurance
companies to offer earthquake insurance in conjunction with a
residential property insurance policy. If you do not accept the offer
of earthquake insurance below within 30 days of the mailing of this
notice, your insurance company may presume that you have not accepted
this offer of earthquake insurance.
You may purchase earthquake insurance coverage, subject to policy
provisions, at additional cost on all of the following terms:
(A) Amount of Dwelling Coverage Insurers may reference Building
Property coverage if a Common Interest Development policy.]:
___________________
(B) Applicable Deductible: ___________________ If your loss is
below this amount, you may not receive any payment for your loss.
(C) Contents Coverage Insurers may reference Personal Property as
that term is in the policy.]: Insurers should include and explain
briefly how the deductible works. Some variation is allowed, but
samples include:
For a Homeowners Policy, the dwelling deductible applies to
Contents Coverage. Nothing will be paid until the dwelling deductible
is met by damage to Coverage A and Coverage B property.
For Renters Policies and Common Interest Development Policies, a
$750 deductible applies to Contents Coverage.]
(D) Additional Living Expenses Insurers may reference Loss of
Use.]: Insurers shall explain briefly if there is a deductible and
how much it is.]
(E) Estimated Annual Premium:_______________
Contact your insurance agent or your insurance company to obtain
details regarding this offer of earthquake insurance and other
coverage options."
(2) If the offer is made by a participating insurer as defined by
Section 10089.5, the offer of earthquake coverage shall contain all
of the following language in at least 10-point boldface type:
"Your property; renters; homeowners; condominium; townhouse;
dwelling; landlord; or other term that may describe the type of
companion policy] policy does not cover earthquake damage to your
home or its contents. To cover earthquake damage to your home and its
contents you need to purchase a separate earthquake insurance
policy. The coverage provided by an earthquake insurance policy is
different from, and typically more limited than, the coverage
provided by your property; renters; homeowners; condominium;
townhouse; dwelling; landlord; or other term that may describe the
type of companion policy] policy. California law requires insurance
companies to offer earthquake insurance in conjunction with a
residential property insurance policy. If you do not accept the offer
of earthquake insurance below within 30 days of the mailing of this
notice, your insurance company may presume that you have not accepted
this offer of earthquake insurance.
You may purchase earthquake insurance coverage, subject to policy
provisions, at additional cost on all of the following terms:
(A) Amount of Dwelling Coverage Insurers may reference Building
Property coverage if a Common Interest Development policy.]:
___________________
(B) Applicable Deductible: ___________________ If your loss is
below this amount, you may not receive any payment for your loss.
(C) Contents Coverage Insurers may reference Personal Property as
that term is in the policy.]: Insurers should include and explain
briefly how the deductible works. Some variation is allowed, but
samples include:
For a Homeowners Policy, the dwelling deductible applies to
Contents Coverage. Nothing will be paid until the dwelling deductible
is met by damage to
Coverage A and Coverage B property.
For Renters Policies and Common Interest Development Policies, a
$750 deductible applies to Contents Coverage.]
(D) Additional Living Expenses Insurers may reference Loss of
Use.]: Insurers shall explain briefly if there is a deductible and
how much it is.]
(E) Estimated Annual Premium:_______________
For an additional premium, you can choose California Earthquake
Authority (CEA) coverage options such as higher limits for contents
or additional living expenses coverages, increased building code
upgrade limits, or a lower deductible. You can also choose to buy
certain CEA coverages separately.
Contact your insurance agent or your insurance company to obtain
details regarding this offer of earthquake insurance and other
coverage options."
(b) When the insurer, agent, or broker establishes delivery of the
disclosure form by obtaining the signature of the applicant or
insured, or when an insurer, agent, or broker provides the applicant
with the disclosure form and the applicant does not return a signed
acknowledgment of receipt within 60 days of the date it was provided,
there shall be a conclusive presumption that the insurer, agent, or
broker has complied with the disclosure requirements of this section.
(c) The offer may contain additional provisions not in conflict
with or in derogation of this section.
(d) The commissioner may only approve modifications to the
language prescribed in subdivision (a) if all of the following
conditions are met:
(1) The modifications are not in conflict with or in derogation of
any provision of this section or Section 10089.
(2) The modifications are necessary to ensure that the disclosure
statement accurately reflects the coverage actually provided by the
policy being offered.
(3) The modifications are strictly limited to necessary changes so
that the modified disclosure statement is otherwise identical to the
disclosure statement prescribed in this section.
(e) Use of the language prescribed by this section, or modified
language approved pursuant to subdivision (d), shall constitute
compliance with the requirements of Section 10081 by an insurer
subject thereto.
(f) This section shall become operative on January 1, 2019.
SEC. 4. Section 10086 of the Insurance
Code , as amended by Section 14 of Chapter 369 of the
Statutes of 2013, is amended to read:
10086. (a) If an offer of earthquake coverage is accepted, the
coverage shall be continued at the applicable rates and conditions
for the policy term, provided the policy of residential property
insurance is not terminated by the named insured or insurer.
(1) At any renewal, an insurer may modify the terms and conditions
of an existing policy, rider, or endorsement providing coverage
against loss or damage caused by the peril of earthquake if the
modified terms and conditions provide the minimum coverages required
by Section 10089.
(2) An insurer that modifies the terms and conditions of an
existing policy, rider, or endorsement shall provide the insured with
the renewal notice in a stand-alone disclosure document stating the
changes in the terms and conditions of the insured's existing policy,
rider, or endorsement. The offer of renewal may be made
electronically pursuant to Section 38.5. Proof of mailing of the
disclosure document by first-class mail to a named insured at the
mailing address shown on the policy or application, or proof
consistent with Section 38.5 that the offer of renewal of coverage
was sent to the named insured or applicant by electronic
transmission, creates a conclusive presumption that the disclosure
document was provided. The disclosure shall include the following
statement in 14-point boldface type:
THE COVERAGE IN THE POLICY WE ARE OFFERING YOU WITH THIS RENEWAL
HAS BEEN REDUCED, AND SUBSTANTIALLY DIFFERS FROM THE COVERAGES
PROVIDED BY YOUR HOMEOWNERS' POLICY. INSURANCE COMPANIES ARE ALLOWED
TO RENEW EARTHQUAKE INSURANCE POLICIES WITH COVERAGE THAT IS REDUCED
FROM THE COVERAGE YOU PREVIOUSLY PURCHASED. YOU MAY REQUEST A SAMPLE
COPY OF THIS NEW POLICY TO REVIEW PRIOR TO MAKING A DECISION TO
ACCEPT THIS RENEWAL, AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE COPY SHALL NOT CHANGE
OR EXTEND THE POLICY EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS NOTICE.
The commissioner shall approve the form of the summary at the time
he or she approves the policy. The summary shall include the
information contained in subdivision (a) of Section 10083, and may be
included with the renewal notice in standard type.
The commissioner may approve substantially similar disclosure
forms if necessary to accurately disclose relevant information to the
policyholder. The commissioner may also approve disclosure forms
substantially similar to the disclosure statement required by Section
10083 if necessary to accurately disclose relevant information to
the policyholder.
(3) If the earthquake coverage is provided by a policy issued by
the California Earthquake Authority, the following disclosure shall
be provided in 14-point boldface type:
CALIFORNIA EARTHQUAKE AUTHORITY POLICY DISCLOSURE
THIS POLICY IS BEING PURCHASED FROM THE CALIFORNIA EARTHQUAKE
AUTHORITY ("CEA"). THE COVERAGE IN THIS CEA POLICY SUBSTANTIALLY
DIFFERS FROM THE COVERAGES PROVIDED IN YOUR HOMEOWNER'S POLICY. THE
CEA IS NOT PART OF OR ASSOCIATED WITH YOUR HOMEOWNER'S INSURANCE
COMPANY. IF LOSSES AS A RESULT OF AN EARTHQUAKE OR A SERIES OF
EARTHQUAKES EXCEED THE AVAILABLE RESOURCES OF THE CEA, THIS POLICY IS
NOT COVERED BY THE CALIFORNIA INSURANCE GUARANTY ASSOCIATION.
THEREFORE, THE CALIFORNIA INSURANCE GUARANTY ASSOCIATION WILL NOT PAY
YOUR CLAIMS OR PROTECT YOUR ASSETS IF THE CEA BECOMES INSOLVENT AND
IS UNABLE TO MAKE PAYMENTS AS PROMISED. IN ADDITION, YOUR CEA POLICY
MAY BE SUBJECT TO FUTURE SURCHARGES OF THE POLICY PREMIUM IN CERTAIN
CASES WHERE AN EARTHQUAKE OR SERIES OF EARTHQUAKES HAS EXCEEDED
AVAILABLE RESOURCES TO PAY CLAIMS. IN THAT CASE, THIS MEANS THAT IN
ADDITION TO THE ANNUAL PREMIUM, YOU MAY BE CHARGED UP TO AN
ADDITIONAL 20% OF THE PREMIUM.
(b) If the offer is not accepted, the insurer or any affiliated
insurer shall be required on an every other year basis to offer
earthquake coverage in connection with any continuation, renewal, or
reinstatement of the policy following any lapse thereof, or with
respect to any other policy that extends, changes, supersedes, or
replaces the policy of residential property insurance. The offer may
be made electronically pursuant to Section 38.5.
(c) Nothing in this section shall preclude the named insured from
terminating the earthquake coverage at any time.
(d) This section shall remain in effect only until
January 1, 2019, July 1, 2015, and as of that
date is repealed, unless a later enacted statute, that is enacted
before January 1, 2019, July 1, 2015,
deletes or extends that date.
SEC. 5. Section 10086 is added to the
Insurance Code , to read:
10086. (a) If an offer of earthquake coverage, made pursuant to
Section 10081, is accepted, the coverage shall be continued at the
applicable rates and conditions for the policy term, provided the
policy of residential property insurance is not terminated by the
named insured or insurer.
(1) At any renewal, an insurer may modify the terms and conditions
of an existing policy, rider, or endorsement providing coverage
against loss or damage caused by the peril of earthquake if the
modified terms and conditions provide the minimum coverages required
by Section 10089.
(2) An insurer that modifies the terms and conditions of an
existing policy, rider, or endorsement shall provide the insured with
the renewal notice in a stand-alone disclosure document stating the
changes in the terms and conditions of the insured's existing policy,
rider, or endorsement. The offer of renewal may be made
electronically pursuant to Section 38.5. Proof of mailing of the
disclosure document by first-class mail to a named insured at the
mailing address shown on the policy or application, or proof
consistent with Section 38.5 that the offer of renewal of coverage
was sent to the named insured or applicant by electronic
transmission, creates a conclusive presumption that the disclosure
document was provided. The disclosure shall include the following
statement in 14-point boldface type:
"THE COVERAGE IN THE POLICY WE ARE OFFERING YOU WITH THIS RENEWAL
HAS BEEN REDUCED, AND SUBSTANTIALLY DIFFERS FROM THE COVERAGES
PROVIDED BY YOUR HOMEOWNERS' POLICY. INSURANCE COMPANIES ARE ALLOWED
TO RENEW EARTHQUAKE INSURANCE POLICIES WITH COVERAGE THAT IS REDUCED
FROM THE COVERAGE YOU PREVIOUSLY PURCHASED. YOU MAY REQUEST A SAMPLE
COPY OF THIS NEW POLICY TO REVIEW PRIOR TO MAKING A DECISION TO
ACCEPT THIS RENEWAL, AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE COPY SHALL NOT CHANGE
OR EXTEND THE POLICY EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS NOTICE."
The commissioner shall approve the form of the summary at the time
he or she approves the policy. The summary shall include the
information contained in subdivision (a) of Section 10083, and may be
included with the renewal notice in standard type.
The commissioner may approve substantially similar disclosure
forms if necessary to accurately disclose relevant information to the
policyholder. The commissioner may also approve disclosure forms
substantially similar to the disclosure statement required by Section
10083 if necessary to accurately disclose relevant information to
the policyholder.
(b) If the offer of earthquake coverage made pursuant to Section
10081 is not accepted, the insurer or any affiliated insurer shall be
required on an every other year basis to offer earthquake coverage
in connection with any continuation, renewal, or reinstatement of the
policy following any lapse thereof, or with respect to any other
policy that extends, changes, supersedes, or replaces the policy of
residential property insurance. The offer may be made electronically
pursuant to Section 38.5.
(c) Nothing in this section shall preclude the named insured from
terminating the earthquake coverage at any time.
(d) This section shall become operative on July 1, 2015.
(e) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date.
SEC. 5. SEC. 6. Section 10086 of the
Insurance Code, as added by Section 15 of Chapter 369 of the
Statutes of 2013, is amended to read:
10086. (a) If an offer of earthquake coverage, made pursuant to
Section 10081, is accepted, the coverage shall be continued at the
applicable rates and conditions for the policy term, provided the
policy of residential property insurance is not terminated by the
named insured or insurer.
(1) At any renewal, an insurer may modify the terms and conditions
of an existing policy, rider, or endorsement providing coverage
against loss or damage caused by the peril of earthquake if the
modified terms and conditions provide the minimum coverages required
by Section 10089.
(2) An insurer that modifies the terms and conditions of an
existing policy, rider, or endorsement shall provide the insured with
the renewal notice in a stand-alone disclosure document stating the
changes in the terms and conditions of the insured's existing policy,
rider, or endorsement. Proof of mailing of the disclosure document
by first-class mail to a named insured at the mailing address shown
on the policy or application creates a conclusive presumption that
the disclosure document was provided. The disclosure shall include
the following statement in 14-point boldface type:
"THE COVERAGE IN THE POLICY WE ARE OFFERING YOU WITH THIS RENEWAL
HAS BEEN REDUCED, AND SUBSTANTIALLY DIFFERS FROM THE COVERAGES
PROVIDED BY YOUR HOMEOWNERS' POLICY. INSURANCE COMPANIES ARE ALLOWED
TO RENEW EARTHQUAKE INSURANCE POLICIES WITH COVERAGE THAT IS REDUCED
FROM THE COVERAGE YOU PREVIOUSLY PURCHASED. YOU MAY REQUEST A SAMPLE
COPY OF THIS NEW POLICY TO REVIEW PRIOR TO MAKING A DECISION TO
ACCEPT THIS RENEWAL, AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE COPY SHALL NOT CHANGE
OR EXTEND THE POLICY EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS NOTICE."
The commissioner shall approve the form of the summary at the time
he or she approves the policy. The summary shall include the
information contained in subdivision (a) of Section 10083, and may be
included with the renewal notice in standard type.
The commissioner may approve substantially similar disclosure
forms if necessary to accurately disclose relevant information to the
policyholder. The commissioner may also approve disclosure forms
substantially similar to the disclosure statement required by Section
10083 if necessary to accurately disclose relevant information to
the policyholder.
(b) If the offer of earthquake coverage made pursuant to Section
10081 is not accepted, the insurer or any affiliated insurer shall be
required on an every other year basis to offer earthquake coverage
in connection with any continuation, renewal, or reinstatement of the
policy following any lapse thereof, or with respect to any other
policy that extends, changes, supersedes, or replaces the policy of
residential property insurance.
(c) Nothing in this section shall preclude the named insured from
terminating the earthquake coverage at any time.
(d) This section shall become operative on January 1, 2019.
SEC. 6. Section 10089.6 of the Insurance Code
is amended to read:
10089.6. (a) There is hereby created the California Earthquake
Authority, which shall be administered under the authority of the
commissioner and have the powers conferred by this chapter. The
authority shall be authorized to transact insurance in this state as
necessary to sell policies of basic residential earthquake insurance
in the manner set forth in Sections 10089.26, 10089.27, and 10089.28.
The authority shall have no authority to transact any other type of
insurance business.
(b) (1) The investments of the authority shall be limited to those
securities eligible under Section 16430 of the Government Code.
(2) The rights, obligations, and duties owed by the authority to
its insureds, beneficiaries of insureds, and applicants for insurance
shall be the same as the rights, obligations, and duties owed by
insurers to its insureds, beneficiaries of insureds and applicants
for insurance under common law, regulations, and statutes. The
authority shall be liable to its insureds, beneficiaries of insureds,
and applicants for insurance as an insurer is liable to its
insureds, beneficiaries of insureds, and applicants for insurance
under common law, regulations, and statutes.
(c) The operating expenses of the authority shall be capped at not
more than 5 percent of the premium income received by the authority.
The funds shall be available to pay any advocacy fees awarded in a
proceeding under subdivision (c) of Section 10089.11.
SEC. 7. Section 10089.26 of the Insurance Code
is amended to read:
10089.26. (a) (1) The authority shall issue policies of basic
residential earthquake insurance, including earthquake loss
assessment policies for individual condominium unit properties, to
any owner of a qualifying residential property, as long as the owner
has secured a policy of residential property insurance from a
participating insurer.
(2) A policy of residential earthquake insurance written by the
authority shall be effective upon receipt by the participating
insurer of both of the following:
(A) The completed authority-approved application for the policy,
signed by the applicant.
(B) Either the annual premium or the first installment of the
annual premium.
(b) For purposes of this section, earthquake loss assessment
coverage shall be issued in a minimum amount of fifty thousand
dollars ($50,000) for individual condominium units valued at more
than one hundred thirty-five thousand dollars ($135,000). Earthquake
loss assessment coverage shall be issued in a minimum amount of
twenty-five thousand dollars ($25,000) for individual condominium
units of one hundred thirty-five thousand dollars ($135,000) in value
or less. The value of the land shall be excluded when determining
the value of the condominium, as it relates to the earthquake loss
assessment coverage offered by the authority.
(c) The panel shall submit to the board, and the board shall
approve, rates for earthquake loss assessment coverage that
reasonably balance the earthquake loss assessment coverages offered
and the potential exposure to earthquake loss resulting from an
earthquake loss assessment policy as compared to the coverages
offered and the potential exposure to earthquake loss resulting from
residential property other than individual condominium policies.
(d) It is the intent of the Legislature, to the extent
practicable, that rates charged by the authority to condominium loss
assessment policyholders and residential property owner policyholders
are treated equitably, and that a proportionate share of premiums is
paid for potential exposure to loss, to the authority.
(e) Nothing in this section shall prohibit a participating or
nonparticipating insurer from offering a condominium earthquake loss
assessment policy for different amounts of coverage other than those
offered by the authority.
SEC. 8. Section 10089.28 of the Insurance Code
is repealed.
SEC. 7. Section 10089.6 of the
Insurance Code is amended to read:
10089.6. (a) There is hereby created the California Earthquake
Authority, which shall be administered under the authority of the
commissioner and have the powers conferred by this chapter. The
authority shall be authorized to transact insurance in this state as
necessary to sell policies of basic residential earthquake insurance
in the manner set forth in Sections 10089.26, 10089.27, and 10089.28.
The authority shall have no authority to transact any other type of
insurance business.
(b) (1) The investments of the authority shall be limited to those
securities eligible under Section 16430 of the Government Code.
(2) The rights, obligations, and duties owed by the authority to
its insureds, beneficiaries of insureds, and applicants for insurance
shall be the same as the rights, obligations, and duties owed by
insurers to its insureds, beneficiaries of insureds and applicants
for insurance under common law, regulations, and statutes. The
authority shall be liable to its insureds, beneficiaries of insureds,
and applicants for insurance as an insurer is liable to its
insureds, beneficiaries of insureds, and applicants for insurance
under common law, regulations, and statutes.
(c) The operating expenses of the authority shall be capped at not
more than 3 percent of the premium income received by the authority.
The funds shall be available to pay any advocacy fees awarded in a
proceeding under subdivision (c) of Section 10089.11.
(d) This section shall remain in effect only until July 1, 2015,
and as of that date is repealed, unless a later enacted statute, that
is enacted before July 1, 2015, deletes or extends that date.
SEC. 8. Section 10089.6 is added to the
Insurance Code , to read:
10089.6. (a) There is hereby created the California Earthquake
Authority, which shall be administered under the authority of the
commissioner and have the powers conferred by this chapter. The
authority shall be authorized to transact insurance in this state as
necessary to sell policies of basic residential earthquake insurance
in the manner set forth in Sections 10089.26, 10089.27, and 10089.28.
The authority shall have no authority to transact any other type of
insurance business.
(b) (1) The investments of the authority shall be limited to those
securities eligible under Section 16430 of the Government Code.
(2) The rights, obligations, and duties owed by the authority to
its insureds, beneficiaries of insureds, and applicants for insurance
shall be the same as the rights, obligations, and duties owed by
insurers to its insureds, beneficiaries of insureds, and applicants
for insurance under common law, regulations, and statutes. The
authority shall be liable to its insureds, beneficiaries of insureds,
and applicants for insurance as an insurer is liable to its
insureds, beneficiaries of insureds, and applicants for insurance
under common law, regulations, and statutes.
(c) The operating expenses of the authority shall be capped at not
more than 5 percent of the premium income received by the authority.
The funds shall be available to pay any advocacy fees awarded in a
proceeding under subdivision (c) of Section 10089.11.
(d) For purposes of this subdivision, the term "operating expenses
of the authority" excludes solely the following:
(1) The costs of and transaction expenses associated with
risk-transfer purchases, including the purchase of reinsurance and
with capital-market contracts.
(2) The expense of securing and repaying bonds.
(3) The cost of repayment of bonds guaranteed, insured, or
otherwise backed by any department or agency of the United States or
of this state, or by any private entity.
(4) Payments to third parties for all of the following services
provided to the authority:
(A) Investment.
(B) Loss-modeling.
(C) Legal services.
(5) Costs associated with the authority's efforts to acquaint the
public with and market authority products, promote earthquake
preparedness, and earthquake-loss mitigation under the authority's
duly adopted strategic plan.
(6) Producer compensation.
(7) Participating insurer fees and reimbursement amounts arising
under written contracts.
(8) Amounts paid by the authority to support research in seismic
science and seismic engineering.
(9) Loans, grants, and expenses to support and maintain the
authority's earthquake loss-mitigation goals and programs, whether
conducted by the authority alone or in collaboration with or by other
persons.
(10) The costs of and loss-adjustment expenses associated with
adjusting and paying policyholder claims for earthquake losses that
are incurred by the authority under its earthquake insurance
policies, including all costs and expenses associated with
claim-related litigation, provided that all of those costs and
expenses shall be reported to the Legislature in the manner required
by subdivision (e) of Section 10089.13.
(e) This section shall become operative on July 1, 2015.
SEC. 9. Section 10089.26 of the
Insurance Code is amended to read:
10089.26. (a) The authority shall issue policies of basic
residential earthquake insurance, including earthquake loss
assessment policies for individual condominium unit properties, to
any owner of a qualifying residential property, as long as the owner
has secured a policy of residential property insurance from a
participating insurer.
(1) For purposes of this section, earthquake loss assessment
coverage shall be issued in a minimum amount of fifty thousand
dollars ($50,000) for individual condominium units valued at more
than one hundred thirty-five thousand dollars ($135,000). Earthquake
loss assessment coverage shall be issued in a minimum amount of
twenty-five thousand dollars ($25,000) for individual condominium
units of one hundred thirty-five thousand dollars ($135,000) in value
or less. The value of the land shall be excluded when determining
the value of the condominium, as it relates to the earthquake loss
assessment coverage offered by the authority.
(2) The panel shall submit to the board, and the board shall
approve, rates for earthquake loss assessment coverage that
reasonably balance the earthquake loss assessment coverages offered
and the potential exposure to earthquake loss resulting from an
earthquake loss assessment policy as compared to the coverages
offered and the potential exposure to earthquake loss resulting from
residential property other than individual condominium policies.
It is the intent of the Legislature, to the extent practicable,
that rates charged by the authority to condominium loss assessment
policyholders and residential property owner policyholders are
treated equitably, and that a proportionate share of premiums is paid
for potential exposure to loss, to the authority.
(b) Nothing in this section shall prohibit a participating or
nonparticipating insurer from offering a condominium earthquake loss
assessment policy for different amounts of coverage other than those
offered by the
authority.
(c) This section shall remain in effect only until July 1, 2015,
and as of that date is repealed, unless a later enacted statute, that
is enacted before July 1, 2015, deletes or extends that date.
SEC. 10. Section 10089.26 is added to the
Insurance Code , to read:
10089.26. (a) (1) The authority shall issue policies of basic
residential earthquake insurance, including earthquake loss
assessment policies for individual condominium unit properties, to
any owner of a qualifying residential property, as long as the owner
has secured a policy of residential property insurance from a
participating insurer.
(2) A policy of residential earthquake insurance written by the
authority shall be effective upon receipt by the participating
insurer of both of the following:
(A) The completed authority-approved application for the policy,
signed by the applicant.
(B) Either the annual premium or the first installment of the
annual premium.
(b) For purposes of this section, earthquake loss assessment
coverage shall be issued in a minimum amount of fifty thousand
dollars ($50,000) for individual condominium units valued at more
than one hundred thirty-five thousand dollars ($135,000). Earthquake
loss assessment coverage shall be issued in a minimum amount of
twenty-five thousand dollars ($25,000) for individual condominium
units of one hundred thirty-five thousand dollars ($135,000) in value
or less. The value of the land shall be excluded when determining
the value of the condominium, as it relates to the earthquake loss
assessment coverage offered by the authority.
(c) The panel shall submit to the board, and the board shall
approve, rates for earthquake loss assessment coverage that
reasonably balance the earthquake loss assessment coverages offered
and the potential exposure to earthquake loss resulting from an
earthquake loss assessment policy as compared to the coverages
offered and the potential exposure to earthquake loss resulting from
residential property other than individual condominium policies.
(d) It is the intent of the Legislature, to the extent
practicable, that rates charged by the authority to condominium loss
assessment policyholders and residential property owner policyholders
are treated equitably, and that a proportionate share of the premium
is paid for potential exposure to loss, to the authority.
(e) Nothing in this section shall prohibit a participating or
nonparticipating insurer from offering a condominium earthquake loss
assessment policy for different amounts of coverage other than those
offered by the authority.
(f) This section shall become operative on July 1, 2015.
SEC. 11. Section 10089.28 of the
Insurance Code is amended to read:
10089.28. (a) All policies of residential earthquake insurance
provided by the authority shall be written by the authority.
Authority policies shall be marketed and policyholders serviced by
the participating insurer that writes the underlying policy of
residential property insurance, and participating insurers shall be
reasonably compensated for the claims and policyholder services they
provide on behalf of the authority. Authority services may be
performed on behalf of the authority in any reasonable manner by the
participating insurer that is in compliance with statutory,
regulatory, and case laws regarding claims handling practices;
provided, however, where the authority has promulgated specific
procedures to govern its operations, the participating insurer shall
conform its practices to those procedures. The authority procedures
shall comply with statutory, regulatory, and case law governing
claims handling practices. Nothing in this provision shall be deemed
or construed to affect any duty or liability of the authority or
participating carrier as set forth in paragraphs (2) and (3) of
subdivision (e) of Section 10089.7.
(b) The participating insurer shall notify each of its insureds
that the authority is the provider of earthquake coverage under the
policy. The form and method of notice shall meet standards
established by the commissioner by regulation. The authority shall
provide to participating insurers appropriate applications and forms
and shall maintain records of all policies written, moneys received,
and claims paid.
(c) The duty of an agent or broker to investigate the financial
condition of the authority before placement of insurance shall be the
same as the duty of an agent or broker to investigate the financial
condition of an admitted insurer before placement of a policy of
insurance.
(d) This section shall remain in effect only until July 1, 2015,
and as of that date is repealed, unless a later enacted statute, that
is enacted before July 1, 2015, deletes or extends that date.
SEC. 9. SEC. 12. Section 10089.28 is
added to the Insurance Code, to read:
10089.28. (a) All policies of residential earthquake insurance
provided by the authority shall be written by the authority.
Authority policies shall be marketed and policyholders serviced by
the participating insurer that writes the underlying policy of
residential property insurance, and participating insurers shall be
reasonably compensated for the claims and policyholder services they
provide on behalf of the authority. Authority services may be
performed on behalf of the authority in any reasonable manner by the
participating insurer that is in compliance with statutory,
regulatory, and case laws law regarding
claims handling practices; provided, however, where the authority
has promulgated specific procedures to govern its operations, the
participating insurer shall conform its practices to those
procedures. The authority procedures shall comply with statutory,
regulatory, and case law governing claims handling practices. Nothing
in this provision shall be deemed or construed to affect any duty or
liability of the authority or participating carrier as set forth in
paragraphs (2) and (3) of subdivision (e) of Section 10089.7.
(b) Concurrent with the issuance or renewal by the authority of a
residential earthquake insurance policy, the participating insurer
shall provide the following disclosure to the insured in 14-point
boldface type:
"California Earthquake Authority Policy Disclosure
You have purchased a California Earthquake Authority (CEA)
earthquake insurance policy, which can help you cover the cost of
repairing damage to your property and possessions caused by an
earthquake.
The CEA is not part of your homeowners' insurance company.
Please keep in mind these important things about your CEA
insurance policy:
1. CEA policy coverages are different from the coverages provided
in your homeowners homeowners'
insurance policy. For example, this policy does not cover earthquake
damage to swimming pools, and it may provide more limited coverage
for chimneys, outbuildings, and masonry fences. These are examples of
possible differences between your CEA policy and your homeowners'
policy, and you should consult your CEA policy to understand the
types of losses that are limited or excluded and those that are
covered.
2. If CEA's liability for earthquake losses exceeds the CEA's
available resources the CEA may reduce its payment to you or pay you
in installments. This policy is not covered by the California
Insurance Guarantee Association Association,
and therefore therefore, the
California Insurance Guarantee Association will not pay your claims
if the CEA becomes insolvent and is unable to make payments as
promised.
3. In certain cases, your CEA policy premium may be subject to
future surcharges if the CEA's obligations to pay earthquake losses
rise to a pre-defined level. In that case, in addition to your annual
premium you may be charged up to an additional 20% of that premium."
(c) The authority shall provide to participating insurers
appropriate applications and forms and shall maintain records of all
policies written, moneys received, and claims paid.
(d) The duty of an agent or broker to investigate the financial
condition of the authority before placement of insurance shall be the
same as the duty of an agent or broker to investigate the financial
condition of an admitted insurer before placement of a policy of
insurance.
(e) This section shall become operative on July 1, 2015.
SEC. 10. Section 10089.41 of the Insurance Code
is repealed.
SEC. 11. Section 10089.41 is added to the
Insurance Code, to read:
10089.41. (a) Compliance with the provisions of Section 10089.42
by a participating insurer shall also constitute compliance by that
participating insurer with Chapter 8.5 (commencing with Section
10081).
(b) If the authority ceases operation for any reason, including,
but not limited to, the repeal of this chapter or insolvency of the
authority, participating carriers shall be required to offer
residential earthquake insurance coverage pursuant to Section 10081.
The commissioner shall adopt a schedule in accordance with
subdivision (a) of Section 10089.35 to establish when participating
carriers shall be required to offer coverage pursuant to Section
10081 to those policyholders for whom they write the underlying
policies of residential property insurance.
(c) If the authority ceases operation pursuant to a statute
enacted by the Legislature, that statute shall determine the duty of
participating insurers to provide earthquake insurance pursuant to
Chapter 8.5 (commencing with Section 10081). Chapter 8.5 (commencing
with Section 10081) shall remain in effect unless specifically
repealed by that statute.
SEC. 12. SEC. 13. Section 10089.42
is added to the Insurance Code, to read:
10089.42. (a) A policy of residential property insurance shall
not be issued, delivered, or renewed in this state, by any
participating insurer unless the named insured is provided
notice of information on the availability of
residential earthquake insurance from the authority within 60 days of
issuance or renewal of the insured's residential insurance policy.
The notice information required by this
subdivision shall do all of the following:
(1) Notify the insured that the residential property insurance
policy does not provide coverage for loss or damage caused by the
peril of earthquake.
(2) Disclose that the insured can apply at any time through the
participating insurer for insurance issued by the authority that
covers loss or damage caused by the peril of earthquake.
(3) Notify the insured that a policy of residential earthquake
insurance from the authority provides different protection, and in
some cases less protection, than the residential property insurance
policy.
(4) Inform the insured of the amounts of premium and deductible
applicable to base-limits authority earthquake insurance coverage.
(5) Direct the insured to an Internet Web site maintained by the
participating insurer or by the authority, or jointly by both, where
the insured can obtain premium estimates and information on
additional earthquake insurance coverages, coverage limits,
deductibles, and other policy and coverage features for a residential
earthquake insurance policy from the authority.
(6) Direct the insured to an Internet Web site or toll-free
telephone number, or both, where the insured can be referred to or
speak with a representative or broker-agent of the participating
insurer who can facilitate the preparation and receipt of an
application for residential earthquake insurance written by the
authority.
(b) The participating insurer may, but shall not be required to,
provide notice the information required
under this section to any insured who has purchased through that
participating insurer, and has in force, a residential earthquake
insurance policy written by the authority.
(c) The authority shall prepare forms of notice
the information required for use by participating
insurers and submit them to the commissioner for approval. The
commissioner shall approve a form of notice if it
accurately discloses the information required by subdivision (a).
Forms of notice The forms are not
required to be reproduced in identical form to the disclosures and
advice set forth in subdivision (a), and they may contain provisions
additional to those set forth in subdivision (a) if the additional
provisions do not conflict with this section.
(d) (1) The notice information
required by this section may be made electronically pursuant to
Section 38.5.
(2) Proof of mailing of any notice
information required by this section by first-class mail to a
named insured at the mailing address shown on the policy or
application, or proof consistent with Section 38.5 that the
notice information was sent to the named insured
or applicant by electronic transmission, creates a conclusive
presumption that the notice information
required by this section was provided.
(e) This section shall become operative on July 1, 2015.
