Quick Take
As fire survivors continue to navigate life after disaster, California lawmakers roll out new bills attempting to further regulate insurance companies like State Farm.
This story was originally published by CalMatters. Sign up for its newsletters.
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 has meant more than a year of going back and forth with State Farm, which has assigned three different claims adjusters to their case. Egan also hired a public adjuster to help her navigate the process, who she says has been a “saving grace.”
Egan and her father have received some payouts and are preparing to make repairs to the home. But this week, they received an estimate for compensation that falls tens of thousands of dollars short of what Egan said they have already paid out of pocket to address a brush violation issued by the fire department, and to conduct soil testing.
She is growing more frustrated. “No one’s asking for a new jacuzzi,” Egan said. “We want my father to be able to return to a safe and habitable home.”
Stories like the Egans’ are all too common after last year’s deadly Los Angeles County fires. State Farm says it has paid $5 billion so far on more than 13,500 claims. But survivors express frustration over insurers’ poor and delayed communication.
State Farm customer Rebecca McGrew has no outstanding complaints about 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 realized — too late — that their insurance payouts won’t cover all of their rebuilding costs.
Survivors and community organizations that have formed after the fires have asked their local and state elected officials for help in dealing with these varied issues. Some of the bills introduced in response to survivors’ experiences include attempts to address the transparency and timeliness related to insurers’ handling of fire claims.
More stringent requirements for insurers
Senate Bill 876 is a wide-ranging bill that seeks to make various amendments to the state’s insurance code. They include getting insurance companies to share 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 they’re assigned a new adjuster.
In addition, the legislation, proposed by new Senate Insurance Committee Chair Steve Padilla and sponsored by Insurance Commissioner Ricardo Lara:
- Expands policy limits for required payments for additional living expenses by 100% in case of a total loss.
- Requires up-front, cash-value payments be made within 30 days of a contract to buy or rebuild a home.
- Requires insurers to offer extended and guaranteed replacement cost coverage when writing policies.
- Applies building-code upgrade coverage at the time of a rebuild.
“People need a sense, particularly when they face tragedy, that the underwriters they’ve relied on and paid into for decades, will want to help and not get in the way [of recovery],” said Padilla, a Democrat from Chula Vista, in an interview with CalMatters.
He acknowledged that the insurance industry will have objections to his bill, but said the companies know that they need to provide adequate coverage for the health of the insurance market.
Padilla is right about the industry’s opposition. “It appears these measures would worsen the current affordability and availability crisis for Californians just as we are starting to implement the Commissioner’s Sustainable Insurance Strategy to restore a healthy and competitive market,” said Seren Taylor, vice president at Personal Insurance Federation of California, in an email.
Lara’s strategy, which went into effect last January just days before the L.A.-area fires, aims to get insurance companies to start writing policies in the state again, especially in areas at high risk of fires. Many insurers had pulled back from the state in the past few years, complaining of increasing fire risks and state regulations that they said slowed down their ability to match prices to those risks.
Tornadoes and drones
Meanwhile, Senate Bill 877 would require insurance companies to provide claims-related documents to policyholders within 15 days. Co-authored by Democratic Sens. Sasha Renée Pérez 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% annually if they fail to meet deadlines for claims payments. The bill, also written by Pérez and Allen, will compel companies to submit to the state’s insurance department a report, signed by a corporate officer under penalty of perjury, that shows the company’s compliance with prompt payment requirements.
In the Assembly, lawmakers plan to introduce bills that will “continue to make sure we have oversight [of insurers],” said Assemblymember Lisa Calderon, the Los Angeles-area Democrat who also chairs the Assembly Insurance Committee, in an interview. She said she expects bills to address strengthening and modernizing the FAIR Plan, as well as mitigation efforts for natural disasters.
She mentioned that California has 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 it’s happened.”
Calderon is trying again to regulate insurers’ use of drone images by introducing Assembly Bill 1559. Her similar effort last year passed the Assembly and made it through some Senate committees but ultimately didn’t advance. This year’s bill would require companies to notify consumers about when they plan to take aerial images of their properties; ban insurers from ending coverage based on drone images taken more than 180 days before sending notice of that decision to policyholders; and require companies to provide the images to policyholders, allowing them to dispute accuracy and to take action if needed before having their policies terminated.
“We’ve been hearing from consumers that they’ve been blindsided by these images that were inaccurate,” she said. “I believe homeowners should have the right to request an in-person inspection.”
She also intends to introduce legislation to implement recommendations from a forthcoming report about the California Wildfire Fund that she expects to include provisions related to the availability and affordability of property insurance in the state.
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