Wildfires have ravaged California the last several years. In addition to the devastation caused, the wildfires have also brought unfair property insurance terms and insurance carriers’ claim practices to light. Fortunately for California policyholders, the legislature has addressed some of these issues, which we have featured in prior blog posts. The California Assembly has already, in 2020, introduced some new legislation that will be friendly to policyholders. It is contained in Assembly Bill No. 182 and is summarized as follows:
- An insurer would be prohibited from deducting the value of land if an insured opts to replace their home with a new home or build a new home at different location. Many insureds whose home was rendered a total loss have opted to buy a new home rather than rebuild. Insurance company’s custom and practice in these situations has been to deduct the land value at the new property from the insured’s payment. Insurers’ justification for this practice is that the insureds are getting a windfall because they have the benefit of retaining the land where the prior home was located. This justification ignores the fact that the land value for the new property often far exceeds the land value for the now vacant land in a burned down neighborhood that is now stigmatized as “fire prone.” The proposed legislation would be added to Cal. Ins. Code §2051.5(c), which was recently amended last year to change the required payment for a building total loss from the fair market failure to the cost to repair less depreciation.
- In a total loss to a primary dwelling caused by a declared state of emergency, an insured would automatically be entitled to a payment of 30% of the personal property limits. No questions asked. This payment would be capped at $250,000. The proposed legislation does not limit an insured’s right to make a claim for further loss and damage to personal property up to the policy limits. This provision would be amended to Cal. Insurance Code § 10103.7. The new provision will require that the dwelling be fully furnished at the time of the loss before an insurer is required to automatically pay 30% of the personal property limits.
- Insurers would be prohibited from issuing policies that have additional living expenses coverage that limits recovery if the insured’s home is uninhabitable due to a government order affecting access to a property or conditions affecting the property’s habitability. The conditions are not defined but the proposed legislation includes the following examples of conditions that affect habitability: smoke, smoke damage, lack of power or water, and conditions or services necessary to the normal use of the dwelling. This proposed law would be a part of Cal. Ins. Code § 2051.5.
These proposed Insurance Code amendments are still early in the legislative process. Merlin’s California team will continue to keep you updated on the status of this legislation as well as other changes in California law.