Wildfires are ravaging California again. Climate change coupled with a prolonged heat wave and a rare summer lightening storm have lit up multiple parts of the State. The fires are hitting numerous populated areas. Homes and business are being destroyed. Unfortunately, this appears to be the new norm. Due to the increase in fire disasters, California has acted to amend the law to increase property insurance protection.

As a reminder, here are some of the new changes in the past few years.

  • The payment for a building that is a total loss is now its actual cash value. This changes the previously mandated payment of a building’s fair market value, i.e. what someone would pay for the home or building itself in its pre-loss condition. Cal. Ins. Code § 2051.5(a). This change in the law helps insureds with older buildings who were left helpless in the wake of California’s expensive housing and construction costs. For example, a senior could own an older home that only had a fair market value of $180,000 but be faced with more than double the reconstruction costs. An ACV payment for fair market value made it virtually impossible to rebuild or buy similar home.
  • If an insured’s property is damaged due to a declared state of emergency, the insured has 24 months from the date that the first payment toward the actual cash value is made to collect the full replacement cost of the loss. The insured’s time to make a replacement cost claim must be extended for an additional six months if good cause is shown. Cal. Ins. Code § 2051.5(b)(1).
  • In the event of a total loss of the insured structure, if the insured decides to buy new property rather than rebuild, the insured is entitled to full replacement cost as long as the new home or building’s cost is within the policy’s replacement cost limits. Cal. Ins. Code § 2051.5(c).
  • If an insured’s property is damaged due to a declared state of emergency, the insured has 24 moths to file suit. This extends the allowable 12 month minimum. Cal. Ins. Code § 2071.

New policy policyholder friendly legislation is on the way. We previously provided a summary in a blog post earlier this year. The post contains links where you can check on the status of the proposed changes:


Please also see Dan Veroff’s recent blog on steps to take if you or client were the victim of recent wildfire: