The following legislative information may be of interest to attorneys practicing insurance law. This information is current as of December 17, 2019:
2019 Enacted Legislation
SB 240 (Dodd) Chapter 502, Statutes of 2019, exempts licensed independent adjusters from the licensing renewal requirements during active military service; requires the California Department of Insurance to publish a bulletin regarding significant California laws pertaining to property insurance policies and an insurance adjuster handbook; requires specified unlicensed independent insurance adjusters to read and understand those materials; and requires insurers to provide a claimant with contact information of an individual or team who will be familiar with the claim if the insurer assigns a third or subsequent adjuster to the claim within a six-month period. This bill took effect immediately upon signature by the Governor. Click here for more information.
SB 740 (Mitchell) Chapter 286, Statutes of 2019, the Unclaimed Life Insurance and Annuities Act, requires life insurers to use the U.S. Social Security Administration’s Death Master File to match deceased Social Security recipients with insureds on life insurance policies, and requires insurers to attempt to locate and notify the beneficiary about the policy. Click here for more information.
AB 188 (Daly) Chapter 59, Statutes of 2019, revises the measure of recovery used for “actual cash value” residential property insurance policies applicable to total losses. Click here for more information. Click here for more information.
AB 1065 (Berman) Chapter 235, Statutes of 2019, repeals the sunset on provisions authorizing insurers to deliver certain types of documents electronically, repeals the sunset on provisions granting life insurers general authority to conduct insurance transactions electronically, and establishes new penalties for noncompliance. Click here for more information.
AB 1209 (Nazarian) Chapter 625, Statutes of 2019, prohibits insurers from using rate schedules based on attained age when offering long-term care insurance policies and life insurance policies that provide long-term care benefits (“hybrid policies”). This bill also revises the rules that apply to hybrid policies in regards to policy loans and withdrawals and requires insurers to provide a disclosure about the risk of lapse to applicants for hybrid policies built on universal life insurance policies. Click here for more information.
AB 1816 (Daly), Chapter 833, Statutes of 2019, requires insurers to provide a 75-day notice (increased from 45) to a policyholder when the insurer refuses to renew a homeowners insurance policy that expires on or after July 1, 2020; raises the limit on homeowners insurance claims on dwellings that are covered by the California Insurance Guarantee Association to $1 million; and expands the areas that qualify for “write-out” credits against assessments issued by the California Fair Access to Insurance Requirements (FAIR) plan. This bill took effect immediately upon signature by the Governor. Click here for more information.
2020 Potential Issues
Insurance Commissioner Order No. 2019-2 requires the FAIR Plan, California’s homeowners insurer of last resort, to expand coverage limits from $1.5 million to $3 million, offer cost-free financing options, and offer full coverage that includes liability. The FAIR Plan recently filed a petition for writ of mandate challenging the order.
Insurer-initiated Nonrenewals of Residential Property Policies in High Fire-Risk Areas will continue to be a controversial topic. Several proposals were offered this year that would require insurers to renew policies if certain mitigation steps have been taken. Similar proposals may be offered in 2020 but must be carefully examined in light of the potential risks of negative market responses, insurer solvency issues, and other factors. Recent FAIR Plan enrollment data covering 2019 indicates a recent surge of enrollments for some areas, especially in the Sierra Nevada communities and the San Bernardino mountains, and pressure will continue to mount to address that issue.
Some residents will be protected from nonrenewal for one year if they are in an area that experienced a wildfire resulting in a declared emergency. Recently, the Insurance Commissioner has also asked that insurers voluntarily stop nonrenewing policies in other areas of the state.
Insurers continue to file petitions for approval for rate increases. Residential property rates will likely increase as insurers seek to adjust their rates to reflect the “new normal.”
Additional Living Expense (ALE) Coverage for victims of the 2017 North Bay Fires has run out for most claimants. A bill enacted last year would have provided additional time but does not apply to victims of the 2017 fires. The Insurance Commissioner has pressured insurers to voluntarily extend that coverage since many homes are still under construction. Most policies have an internal limit on ALE and extending the period might not significantly impact the total loss; however, some insurers do not have an internal limit and have refused the extension.
Power Outages have posed a particular burden to communities and businesses. Commercial insurance policies covering business interruption or property damage will often exclude losses resulting from utility outages of any kind; if they do cover those losses, they will not likely cover a planned outage. There may be some efforts to fill in that gap if outages continue as expected.
Suitability of Universal Life Insurance would establish a list of questions and factors that a life insurance agent would have to explore with an applicant for a universal life insurance policy in order to determine if that product would be appropriate for that applicant.
This e-Bulletin was prepared by Hugh Slayden, Principal Consultant with the California State Senate, Committee on Insurance. Mr. Slayden is a contributor to the Insurance Law Standing Committee of the Business Law Section of the California Lawyers Association.