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Update: Expanded Protections in the California Insurance Code Amidst Wildfire Property Loss in California

October 18, 2021

Wildfire season in California is not yet over. This update on recent California legislative reforms provides practical information for insurers offering residential insurance in California, in light of the current severe drought, anticipated La Nina weather pattern this winter and what is proving to be another season of devastating wildfires. California Senate Bill 872 is a significant piece of consumer-friendly legislation that has been incorporated into the California Insurance Code. It has expanded protections for insureds following loss of a primary residence caused by catastrophic events as follows.

California Senate Bill 872

Effective January 1, 2021, Senate Bill 872 made many previously voluntary claims-handling procedures mandatory, in the event of a covered loss relating to a state of emergency:

1. Mandatory 4-month Advance Payment of ALE for Total Losses
California Insurance Code § 2061(a)(1) now provides that if an insured has made a claim for additional living expenses related to a total loss, an insurer must, upon request by an insured, render an advance payment of no less than four months of living expenses. It is worth noting that when wildfires occurs in an area of California, the cost for comparable rental values in the surrounding areas greatly increase due to the demand.

2. Company-Specific Inventory Form Not Necessary for Contents Claims
California Insurance Code § 2061(a)(2) now provides that if an insured has made a claim for contents related to a total loss of a primary residence, an insurer cannot require that the insured use a company-specific inventory form if the insured can provide an inventory form that contains substantially the same information. However, this does not limit the authority of an insurer to seek additional reasonable information. With this provision, insureds will now be able to use their own forms for inventory, which may lead to additional time for the claims-handling and adjusting process for catastrophic claims.

3. Groupings of Categories of Personal Property Must be Accepted
California Insurance Code § 2061(a)(3) now provides that if an insured has made a claim for contents related to a total loss of a primary residence, an insurer must accept an inventory that includes groupings of categories of personal property, including but not limited to items such as clothing, shoes, books, food items, and electronics. With this provision, insureds no longer have to give individual information for items, which again could lead to lack of specificity and valuation for each item in the grouping.

4. 60-Day Policy Premium Grace Period
Section 2062 was added to the California Insurance Code providing that an insurer must offer a 60-day grace period for payment of premiums for residential property insurance policies covering a property located within the affected area and for a period of 60 days after the emergency. Understanding and knowing about this grace period is important, particularly in order to prevent potential issues with accidental cancellations or non-renewals which may occur if unaware of this new Code section.

Being aware of these new mandatory claims-handling practices and assisting insureds with grace periods for policy premiums will help develop strong relationships with insureds and good will with your clients.

 

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