California lawmakers are proposing a package of consumer-protection and insurer-timing rules for wildfire claims after survivors described problems ranging from delayed communication to payouts that fall short of rebuilding costs.
One example cited in the reporting involves Jen Egan, who said she has been dealing with the aftermath of the Palisades Fire that damaged the home of her 83-year-old father, Paul, last January. The reporting says Egan’s family has gone back and forth for more than a year with State Farm, which assigned three different claims adjusters to their case, and that Egan hired a public adjuster to help navigate the process.
Egan and her father have received some payouts and are preparing to make repairs, 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. Egan said the situation is not about luxury upgrades, adding: “No one’s asking for a new jacuzzi.” She said: “We want my father to be able to return to a safe and habitable home.”
Stories like the Egans’ are described as common among survivors of last year’s deadly Los Angeles County fires, including complaints that insurers’ communication has been poor and delayed. The reporting says State Farm has paid $5 billion so far on more than 13,500 claims, while another survivor, Rebecca McGrew, has no outstanding complaints about her claims after her Altadena home burned down, except that she was “drastically under-insured by hundreds of thousands of dollars.”
Survivors and community organizations that formed after the fires have asked local and state elected officials for help in addressing those issues, including transparency and timeliness in how insurers handle fire claims. Among the bills introduced in response are several measures aimed at requiring faster notifications and payments, along with more specific disclosures and reporting requirements.
Senate Bill 876 is described as a wide-ranging bill that would amend California’s insurance code. It would include provisions requiring insurers 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 a new adjuster is assigned.
The bill, proposed by new Senate Insurance Committee Chair Steve Padilla and sponsored by Insurance Commissioner Ricardo Lara, would also expand policy limits for required payments for additional living expenses by 100% in case of a total loss. It would require upfront, cash-value payments within 30 days of a contract to buy or rebuild a home, and require insurers to offer extended and guaranteed replacement cost coverage when writing policies. It would also apply building-code upgrade coverage at the time of a rebuild.
In an interview with CalMatters, Padilla said 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).” Padilla acknowledged that the insurance industry would have objections, while also saying the companies know they need to provide adequate coverage for the health of the insurance market.
The reporting also includes pushback from the industry. Seren Taylor, vice president at Personal Insurance Federation of California, said in an email that 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.”
The article places the proposals alongside Lara’s strategy, which it says went into effect last January just days before the Los Angeles-area fires. It describes Lara’s Sustainable Insurance Strategy as aimed at getting insurance companies to start writing policies again, especially in areas at high risk of fires, after many insurers pulled back in recent years, citing increasing fire risks and state regulations they said slowed their ability to match prices to those risks.
Other bills in the package focus more narrowly on documentation and claim-payment timelines. Senate Bill 877 would require insurers to provide claims-related documents to policyholders within 15 days and would require disclosure of changes to repair estimates, including 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, and it would require companies to submit to the insurance department a report signed by a corporate officer under penalty of perjury showing their compliance with prompt-payment requirements.
In the Assembly, lawmakers plan to introduce additional measures, including oversight work aimed at insurer practices. Assemblymember Lisa Calderon, a Los Angeles-area Democrat who chairs the Assembly Insurance Committee, said lawmakers would “continue to make sure we have oversight (of insurers).” She said she expects bills to strengthen and modernize the FAIR Plan and to address mitigation efforts for natural disasters, and she cited California’s recent weather, saying: “Last year, we had two small tornadoes in urban Los Angeles. I can’t remember another year when it’s happened.”
Calderon is also trying again to regulate how insurers use drone images through Assembly Bill 1559. The reporting says the proposal would require insurers to notify consumers 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 insurers to provide the images to policyholders so they can dispute their accuracy before policies are terminated. Calderon said she believes homeowners should have the right to request an in-person inspection, adding: “I believe homeowners should have the right to request an in-person inspection.” She also said she intends to introduce legislation implementing recommendations from a forthcoming report about the California Wildfire Fund, including provisions related to the availability and affordability of property insurance in the state.