Bill Text: CA SB894 | 2017-2018 | Regular Session | Amended


Bill Title: Property insurance.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Introduced) 2018-03-23 - Set for hearing April 25. [SB894 Detail]

Download: California-2017-SB894-Amended.html

Amended  IN  Senate  March 08, 2018
Amended  IN  Senate  February 26, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 894


Introduced by Senators Dodd and McGuire
(Coauthor: Assembly Member Levine)

January 12, 2018


An act to amend Sections 675.1 and 2051.5 of, and to add Section 10103.7 to, the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


SB 894, as amended, Dodd. Property insurance.
Existing law requires an insurer, in the case of a total loss to the primary insured structure under a policy of residential property insurance, to offer to renew the policy at least once if the loss to the primary insured structure was caused by a disaster, as defined, and was not also due to the negligence of the insured, except as specified.
This bill would instead require the insurer to offer to renew the policy for at least the next 2 annual renewal periods or 24 months, whichever is greater. The bill would require an insurer who decides not to offer to renew a policy after the expiration of that period to report the decision to not offer to renew the policy to the Insurance Commissioner. The bill would require an insurer who, within 5 years after the declaration of a disaster, decides that it will not offer, or offer to renew, any residential policies described above for coverage of loss to structures located in the declared disaster area, to report that decision to the commissioner.
Existing law defines the measure of indemnity for a loss under a property insurance policy and specifies time limits under which an insured must collect the full replacement cost of the loss. Existing law prohibits a property insurance policy issued or delivered in the state from limiting or denying payment of the replacement cost of property in the event the insured decides to rebuild or replace the property at a location other than the insured premises. Existing law provides that coverage for additional living expenses incurred due to a covered loss relating to a state of emergency shall be for a period of 24 months.
This bill would increase from 24 months to no less than 36 months, the minimum coverage for additional living expenses in the case of a loss relating to a declared state of emergency, and would allow extensions of 6 months for good cause.
This bill would require an insurer to allow an insured that has suffered a loss relating to a declared state of emergency to combine the policy limits for primary dwelling, other structures, contents, and additional living expenses, and to use the combined amount for any of the covered purposes.
The bill would make certain provisions of the bill retroactive to any applicable claim filed on or after July 1, 2017. The bill would provide that the provisions of the bill are severable.
The bill would make other technical, nonsubstantive changes.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

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


SECTION 1.

 Section 675.1 of the Insurance Code is amended to read:

675.1.
 In the case of a total loss to the primary insured structure under a residential policy subject to Section 675, the following provisions apply:
(a) If reconstruction of the primary insured structure has not been completed by the time of policy renewal, the insurer, prior to or at the time of renewal, and after consultation by the insurer or its representative with the insured as to what limits and coverages might or might not be needed, shall adjust the limits and coverages, write an additional policy, or attach an endorsement to the policy that reflects the change, if any, in the insured’s exposure to loss. The insurer shall adjust the premium charged to reflect any change in coverage.
(b) The insurer shall not cancel coverage while the primary insured structure is being rebuilt, except for the reasons specified in subdivisions (a) to (e), inclusive, of Section 676. The insurer shall not use the fact that the primary insured structure is in damaged condition as a result of the total loss as the sole basis for a decision to cancel the policy pursuant to subdivision (e) of that section.
(c) (1) 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 or 24 months, whichever is greater, but no less than 24 months of coverage from the date of the loss to renew the policy in accordance with the provisions of subdivision (a) 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.
(2) If an insurer does not offer to renew a policy after the expiration of the period described in paragraph (1), the insurer shall report the decision to not offer to renew the policy to the commissioner.
(3) If an insurer, within five years after the declaration of a disaster, as defined in subdivision (b) of Section 1689.14 of the Civil Code, decides that it will not offer, or offer to renew, any residential policies described in this section for coverage of loss to structures located in the declared disaster area, the insurer shall report that decision to the commissioner.
(d) With respect to policies of residential earthquake insurance, the California Earthquake Authority, or any insurer, including a participating insurer, as defined in subdivision (i) of Section 10089.5, may defer its initial implementation of this section until no later than October 1, 2005.
(e) With respect to a residential earthquake insurance policy issued by the California Earthquake Authority, the following provisions apply:
(1) The participating insurer that issued the underlying policy of residential property insurance on the primary insured structure shall consult with the insured as to what limits and coverages might or might not be needed as required by subdivision (a).
(2) The California Earthquake Authority, in lieu of meeting the requirements of subdivision (a), 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.

SEC. 2.

 Section 2051.5 of the Insurance Code is amended to read:

2051.5.
 (a) Under an open policy that requires payment of the replacement cost for a loss, the measure of indemnity is the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less.
If the policy requires the insured to repair, rebuild, or replace the damaged property in order to collect the full replacement cost, the insurer shall pay the actual cash value of the damaged property, as defined in Section 2051, until the damaged property is repaired, rebuilt, or replaced. Once the property is repaired, rebuilt, or replaced, the insurer shall pay the difference between the actual cash value payment made and the full replacement cost reasonably paid to replace the damaged property, up to the limits stated in the policy.
(b) (1) Except as provided in paragraph (2), no time limit of less than 12 months from the date that the first payment toward the actual cash value is made shall be placed upon an insured in order to collect the full replacement cost of the loss, subject to the policy limit. Additional extensions of six months shall be provided to policyholders for good cause. In the event of a loss relating to a “state of emergency,” as defined in Section 8558 of the Government Code, no time limit of less than 24 months from the date that the first payment toward the actual cash value is made shall be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit. Nothing in this section shall prohibit the insurer from allowing the insured additional time to collect the full replacement cost.
(2) In the event of a covered loss relating to a state of emergency, as defined in Section 8558 of the Government Code, coverage for additional living expenses shall be for a period of no less than 36 months from the inception of the loss, but shall be subject to other policy provisions. Additional extensions of six months shall be provided to policyholders for good cause.
(c) In the event of a total loss of the insured structure, no policy issued or delivered in this state may contain a provision that limits or denies payment of the replacement cost in the event the insured decides to rebuild or replace the property at a location other than the insured premises. However, the measure of indemnity shall be based upon the replacement cost of the insured property and shall not be based upon the cost to repair, rebuild, or replace at a location other than the insured premises.
(d) Nothing in this section shall prohibit an insurer from restricting payment in cases of suspected fraud.

SEC. 3.

 Section 10103.7 is added to the Insurance Code, to read:

10103.7.
 In the event of a covered loss relating to a state of emergency, as defined in Section 8558 of the Government Code, an insured under a residential property insurance policy shall be permitted to combine the policy limits for the primary dwelling, other structures, contents, and additional living expenses. If the insured chooses this option, the insured may use these combined limits for any of the covered expenses reasonably necessary to rebuild or replace the damaged or destroyed dwelling, other structures, or contents, or for additional living expenses.

SEC. 4.

 The provisions of this bill are severable. If any provision of this bill or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 5.

 Paragraph (1) of subdivision (c) of Section 675.1 of the Insurance Code, as amended by this bill, and paragraph (2) of subdivision (b) of Section 2051.5 of the Insurance Code, as amended by this bill, shall be applied retroactively to any applicable claim filed on or after July 1, 2017.
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