STATE OF OKLAHOMA

2nd Session of the 53rd Legislature (2012)

HOUSE BILL 2863	By:	Shelton

AS INTRODUCED

An Act relating to insurance; creating the Earthquake Insurance Act of 2012; defining terms; requiring certain insurers to offer insurance for losses due to earthquakes; specifying period in which offer shall be made; specifying contents of mandatory offer; authorizing Insurance Commissioner to approve certain modifications to mandatory offer; specifying optional methods insurers may use to provide coverage; requiring insurers to maintain proof of the offer of coverage; providing for the renewal or modification of certain policies; requiring insurers to offer coverage periodically or at renewal of policy; requiring insurers to provide certain notice to insured if coverage is declined by the insured; prohibiting insurers from discriminating against insured for acceptance of coverage; specifying fire insurance policies shall not be exempted by earthquake-related fires; requiring insurers to disclose certain discounts and surcharges available to insured; providing for codification; and providing an effective date.

BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.1 of Title 36, unless there is created a duplication in numbering, reads as follows:
A.  Sections 1 through 11 of this act shall be known and may be cited as the “Earthquake Insurance Act of 2012”.
B.  As used in the Earthquake Insurance Act of 2012:
1.  “Residential property insurance” means a policy that insures a residential structure of not more than four dwelling units, a condominium unit, or a manufactured home or mobile home, and their contents, located in this state, or a tenant's policy insuring personal contents of a residential unit.  Excluded from this definition are:
a.	insurance for real property or its contents used for any commercial, industrial, or business purpose, except a structure of four or fewer dwelling units, and 
b.	an insurance policy that does not include any peril insured against in a standard fire policy; and
2.  “Mandatory offer” means the offer of earthquake insurance specified in Section 2 of this act.
SECTION 2.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.2 of Title 36, unless there is created a duplication in numbering, reads as follows:
No policy of residential property insurance may be issued, or for policies in effect on November 1, 2012, initially renewed, by any insurer unless the named insured is offered coverage for loss caused by the peril of earthquake.  
1.  That coverage may be provided in the residential-property-insurance policy by policy provision or by endorsement, or in a separate insurance policy.  
2.  The offer may be made by the insurer, or by an agent or broker acting at the direction and on behalf of the insurer.
SECTION 3.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.3 of Title 36, unless there is created a duplication in numbering, reads as follows:
A.  The mandatory offer required pursuant to Section 2 of the Earthquake Insurance Act of 2012 may be made:
1.  Before the issuance or renewal of the residential property insurance policy;
2.  When the residential property insurance policy is issued or renewed; or
3.  Within sixty (60) days following the residential-property-insurance policy issuance or renewal.  
B.  The mandatory offer shall be directed to the applicant or insured and state the following:
“1.  Your homeowners insurance policy does cover loss from earthquakes;  
2.  Oklahoma law requires that your insurer offer you earthquake coverage.  It is your option whether to accept that offer;  
3.  Earthquake insurance coverage may be different from your homeowners insurance coverage.  It may provide less protection, and it may have exclusions and limitations that are not present in your homeowners policy;
4.  This disclosure form is not part of your earthquake insurance policy.  Only your earthquake insurance policy determines whether a loss is covered, and if so, the amount payable;    
5.  The company will provide within ten (10) days of your written request an explanation of the cost and details of the earthquake coverages available for your structure, your personal property, and the cost of living outside your home if you cannot return home because of earthquake-related damage; and
6.  Your earthquake coverage will become effective on the day we receive your signed acceptance of this offer.”
C.  The signature of the applicant or insured accepting the mandatory offer, or the failure of the applicant or insured to return a signed mandatory offer within sixty (60) days of the date it was provided, establish a conclusive presumption that the insurer, agent, or broker has complied with this section. 
D.  The Insurance Commissioner may approve modifications to the mandatory offer that do not conflict with this section or otherwise limit required earthquake insurance provisions or coverages.
SECTION 4.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.4 of Title 36, unless there is created a duplication in numbering, reads as follows:
An insurer may comply with the mandatory offer requirement by:
1.  Underwriting directly the risk of earthquake loss;
2.  Arranging for earthquake coverage to be offered by an affiliated insurer; or
3.  Arranging for earthquake coverage to be offered through a nonaffiliated insurer.
SECTION 5.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.5 of Title 36, unless there is created a duplication in numbering, reads as follows:
A.  Insurers shall maintain proof of mailing or delivery of the mandatory offer of earthquake insurance required pursuant to Section 2 of the Earthquake Insurance Act of 2012. 
B.  An election by any named insured to accept or reject the mandatory offer shall be binding on any other person insured and any other party having an insurable interest in the insured property.
SECTION 6.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.6 of Title 36, unless there is created a duplication in numbering, reads as follows:
A.  After an offer of earthquake coverage is accepted the coverage shall be continued for the policy term, unless the named insured or the insurer terminates the residential property insurance policy or the earthquake insurance policy.
B.  An insurer may modify an existing earthquake insurance policy if those modifications provide all applicable, required earthquake insurance provisions and coverages.
C.  An insurer that renews an existing earthquake insurance policy under modified terms and conditions shall clearly explain in or with its renewal notice all the modifications.  The Insurance Commissioner is authorized to approve or disapprove the renewal notice, as necessary to assure the notice accurately discloses all relevant information to the policyholder.  
SECTION 7.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.7 of Title 36, unless there is created a duplication in numbering, reads as follows:
A.  If the mandatory offer is not accepted, the insurer shall offer earthquake coverage every other year: 
1.  With any continuation, renewal, or reinstatement of the residential property insurance policy following any lapse; or 
2.  With any other policy that extends, changes, supersedes, or replaces the policy of residential property insurance. 
B.  The named insured may terminate the earthquake insurance policy or coverage at any time.
SECTION 8.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.8 of Title 36, unless there is created a duplication in numbering, reads as follows:
If the named insured does not accept the mandatory offer, the insurer shall notify the named insured that the residential property insurance policy does not provide earthquake coverage, whether following initial application or before or with renewal of the residential property insurance policy.  
SECTION 9.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.9 of Title 36, unless there is created a duplication in numbering, reads as follows:
A.  An insurer shall not reject or cancel, or refuse to renew, a residential property insurance policy after acceptance of a mandatory offer solely because of that acceptance, unless the policy is terminated by the named insured. 
B.  Residential property insurance underwriting standards shall not be applied in any discriminatory fashion against a person who accepts or continues earthquake coverage. 
SECTION 10.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.10 of Title 36, unless there is created a duplication in numbering, reads as follows:
No provision of the Earthquake Insurance Act of 2012 exempts an insurer from its obligation under a fire insurance policy to cover the losses of a fire that is caused by, or that follows, an earthquake.
SECTION 11.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 6975.11 of Title 36, unless there is created a duplication in numbering, reads as follows:
A.  Every insurer subject to the Earthquake Insurance Act of 2012, with its mandatory offer, shall:
1.  Disclose any discounts and surcharges applicable to the offered earthquake insurance coverage; and 
2.  Disclose any discounts or surcharges for earthquake-hazard reductions, including, without limitation, for tying or bracing the dwelling frame to its foundation, reinforcing the fireplace chimney, or securing the water heater. 
B.  All forms of disclosure and all discounts and surcharges are subject to approval of the Insurance Commissioner.
C.  Each insurer that offers earthquake insurance through agents or brokers shall disclose to them all discounts or surcharges that are required to be disclosed to the applicant or insured under the Earthquake Insurance Act of 2012 and require them to make the disclosures required by this section.
SECTION 12.  This act shall become effective November 1, 2012.

53-2-8127	SDR	01/12/12