California residents were not spared from disaster in 2018. Instead, devastating wildfires continued, which included the biggest and most devastating wildfires to ever ravage California. The continued disasters were more frequent and begun much earlier during California’s prolonged dry period. The number and size of the wildfires along with insurance carriers’ claim handling have brought insurance issues to the legislature and governor’s attention. This has resulted in new laws benefitting policyholders. Some of the important legislation enacted into law in California in 2018 is summarized below.
California Insurance Code § 530.5 requires that when loss or damage is caused by a combination of perils, one of which is a landslide, then coverage must be provided when an insured peril is the efficient proximate cause of the loss or damage. Although the efficient proximate cause can be confusing, it is generally held to be the predominant cause of the loss when there is more than one independent contributing cause of loss. The efficient proximate cause does not have to be the initiating cause or the immediate cause. Instead, the efficient proximate cause is viewed as the most important cause of a loss.1 Under the insurance code’s new language, an insurer will be barred from relying on policy language that excludes losses “contributed to or aggravated by” a landslide when a landslide was triggered by wildfire or rainstorm, which have been found by courts to be the efficient proximate cause of a landslide.2
California Insurance Code § 2051.5 extends new benefits to policyholders when they decide to buy a new home rather than rebuild after a total fire loss. First, the law clarifies that a policyholder who chooses to relocate to a different location to rebuild or replace is entitled to receive the benefits of:
- Extended replacement cost, and
- Building upgrade coverage
Thus, a homeowner can still receive code upgrade coverage if such code upgrades were required had the the insured opted to rebuild the destroyed home. The new law also extends, from 24 months to 36 months, the period of time a policyholder is entitled to collect full replacement benefits under a replacement cost fire insurance policy. Language with this new requirement must be contained in all insurance policies issued after July 1, 2019.
California Insurance Code § 2071 was amended to extend the existing statute of limitations for a homeowner to sue their insurer from twelve to 24 months when a loss is related to a declared state of emergency. In 2018, there were twelve separate federal states of emergency declared in California. All the declarations arose out of the devastating series of wild fires.
California Insurance Code § 10103.4 requires an insurer to provide, at the time an offer to renew a policy of residential property insurance is made to the policyholder and on a bi-yearly basis, an estimate of the cost necessary to rebuild or replace the insured building that complies with specified existing regulations. This law will take effect by July 1, 2019.
California Insurance Code § 671 was amended to prohibit an insurer from canceling or refusing to renew a homeowners’ insurance policy for one year from the date of a declaration of a state of emergency. This law also requires an insurer to renew a residential insurance policy for at least two annual renewal periods or 24 months.
California Insurance Code § 10095.7 will require, by July 2020, the California Department of Insurance to establish a home insurance finder on its website that helps homeowners find insurers that offer homeowner’s policies in their area.
1 Garvey v. State Farm Fire & Cas. Co. (1989) 48 Cal.3d 395, 412.
2 Howell v. State Farm Fire & Cas. Co. (1990) 218 Cal.App.3d 1446, 1452.