Lawmakers are proposing consumer-friendly changes to California fire insurance laws

from Levi SumagasaiCalMatters

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Jen Egan is still dealing with the aftermath of the Palisades fire that damaged the home of her 83-year-old father, Paul, last January.

That meant more than a year of dealing with State Farm, which had assigned three different adjusters to their case. Egan also hired a community adjuster to help her navigate the process, which she says was a “saving grace.”

Egan and her father have received some payments and are preparing to make repairs on the home. But this week, they received a compensation assessment that’s tens of thousands of dollars less than what Egan said they’ve already paid out of pocket to deal with a brush violation issued by the fire department and to conduct soil tests.

She becomes increasingly frustrated. “Nobody wants a new hot tub,” Egan said. “We want my father to be able to return to a safe and livable home.”

Stories like Egan’s are all too common after last year’s deadly fires in Los Angeles County. State Farm says it has paid out $5 billion so far in more than 13,500 claims. But survivors express frustration with poor and delayed communication from insurers.

State Farm customer Rebecca McGrew has no complaints outstanding on her claims after her Altadena home burned down — except that she was “drastically underinsured by hundreds of thousands of dollars.” Many others like her have found out – too late – that their insurance payments won’t cover all of their recovery costs.

Survivors and community organizations that have formed since the fires have asked their local and state officials for help in dealing with these diverse issues. Some of the bills introduced in response to survivors’ experiences include attempts to address the transparency and timeliness associated with insurers’ processing of fire claims.

Stricter requirements for insurers

Senate Bill 876 is a wide-ranging bill that seeks to make various amendments to the state’s insurance code. These include insurance companies sharing their disaster recovery plans with the insurance department; doubling penalties from $5,000 to $10,000 for each violation of fair claims practices during declared emergencies; and requiring insurers to notify policyholders within five days when a new adjuster is appointed.

In addition, legislation proposed by new Senate Insurance Committee Chairman Steve Padilla and sponsored by Insurance Commissioner Ricardo Lara:

• Extends policy limits for required additional living expense payments by 100% in case of total loss.
• Requires cash down payments within 30 days of entering into a contract to purchase or remodel a home.
• Requires insurers to offer extended and guaranteed replacement cost coverage when writing policies.
• Applies building code upgrade coverage during reconstruction.

“People need to feel, especially when faced with a tragedy, that the insurers they’ve relied on and paid for for decades will want to help, not hinder (recovery),” Padilla, a Chula Vista Democrat, said in an interview with CalMatters.

He acknowledged the insurance industry would object to his bill, but said companies know they need to provide adequate health coverage in the insurance market.

Padilla is right about industry resistance. “These measures appear likely to worsen the current crisis of affordability and availability for Californians just as we begin to implement the Commissioner’s Sustainable Insurance Strategy to restore a healthy and competitive marketplace,” Serene Taylor, vice president of the Personal Insurance Federation of California, said in an email.

Lara’s strategy, which went into effect last January just days before the fires in the Los Angeles area, aims to get insurance companies to start writing policies again in the state, especially in areas at high risk of wildfires. Many insurers have pulled out of the state in the past few years, complaining of rising fire risks and state regulations that they say are slowing their ability to match prices to those risks.

Tornadoes and drones

Meanwhile, Senate Bill 877 will require insurance companies to provide claim-related documents to policyholders within 15 days. Co-authored by Democratic Sens. Sasha Renee Perez of Pasadena and Ben Allen of El Segundo, the legislation would also require insurers to disclose changes to repair estimates, who approved them and why.

Senate Bill 878 would require insurers to pay interest of 20% per annum if they fail to meet deadlines for claim payments. The bill, also authored by Perez and Allen, would force companies to submit to the state insurance department a report signed by a corporate officer under penalty of perjury showing the company’s compliance with prompt payment requirements.

In the Assembly, lawmakers plan to introduce bills that would “continue to make sure we have oversight (of insurers),” Assemblywoman Lisa Calderon, D-Los Angeles, who also chairs the Assembly’s insurance committee, said in an interview. She said she expects the bills to address strengthening and modernizing the FAIR plan as well as natural disaster mitigation efforts.

She mentioned that California has had to deal with fires, floods, earthquakes and last year something rare: “Last year we had two small tornadoes in urban Los Angeles. I can’t remember another year when that happened.”

Calderon is again trying to regulate the use of drone imagery by insurers by introducing Assembly Bill 1559. Her similar effort last year made its way through the Assembly and through some Senate committees, but ultimately did not advance. This year’s bill would require companies to notify consumers when they plan to take aerial images of their properties; prohibiting insurers from terminating coverage based on drone imagery taken more than 180 days before notification of that decision is sent to policyholders; and requires companies to provide the images to policyholders, allowing them to dispute accuracy and take action if necessary before their policies are terminated.

“We’re hearing from users that they’ve been blindsided by these images that are inaccurate,” she said. “I believe that homeowners should have the right to request an in-person inspection.”

She also intends to introduce legislation to implement recommendations from an upcoming report on the California Wildfire Fund, which she expects to include provisions related to the availability and affordability of property insurance in the state.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.