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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.