San Francisco Chronicle - (Sunday)
State bills to boost fire coverage wither
In January, state lawmakers and Insurance Commissioner Dave Jones grandly announced a package of bills aimed at beefing up homeowners insurance coverage for victims of wildfires and other disasters.
Five months later, some of the bills are up in smoke. Others have been watered down under intense pressure from the insurance industry.
The California Department of Forestry and Fire Protection report issued Friday, blaming Pacific Gas and Electric Co. for 12 more wildfires (but not the big Tubbs Fire that devastated Santa Rosa), is not expected to affect the legislation. “Most people expected this is what Cal Fire would find,” said Mark Sektan, vice president with the Property Casualty Insurers Association of America.
State Sen. Mike McGuire, D-Healdsburg, pulled his bill on May 31. SB897 would have required insurance companies, following a declared disaster, to pay at least 80 percent of a policyholder’s contents/personal property coverage limit without a detailed inventory. Itemizing every item lost can be laborious and emotionally traumatic for disaster survivors. The bill would have been retroactive to July 1, 2017, helping victims of last
year’s North Bay fires.
In negotiations, insurance lobbyists were willing to pay up to 25 percent of contents coverage without an inventory, and the chairman of the Senate Insurance Committee suggested 50 percent, McGuire said. But he was unwilling to set such a low bar.
In December, Jones urged insurance companies to pay fire survivors at least 25 percent of contents without an inventory, but many companies voluntarily agreed to provide more. “More than one-third of total loss claims from 2017’s devastating fires were with insurance companies that offered at least 80 percent of contents coverage” without an inventory, Jones said in a press release. A few companies, including Allstate and Farmers, provided 100 percent.
Industry groups said that “mandating unnecessary requirements” would increase premiums and limit choice in coverage for all homeowners, according to a bill analysis.
Rather than revive the bill, “it is our belief that this state may need to put this issue on the ballot for voters to decide,” McGuire said.
SB894, by Sen. Bill Dodd, D-Napa, is still alive but slimmed down. It passed the Senate and is scheduled for an Assembly Insurance Committee hearing June 20.
Its main provision would apply only to people who suffer a total loss in a declared disaster and do not have enough dwelling coverage to replace the home itself.
Most policies have separate dollar limits for the primary dwelling; other structures such as pools, fences, decks, detached garages and landscaping; contents/personal property; and additional living expenses, such as rent on a temporary home. The last three limits are usually a percentage of the first.
The bill would let policyholders whose dwelling was underinsured forgo replacing other structures or contents — such as a pool or grand piano — and apply the full replacement value of those items to their primary dwelling (if they have replacement-cost coverage). This provision would not be retroactive.
Originally, the bill was far more generous. Policyholders could have transferred coverage, up to their dollar limit for each category, among any of those four categories.
Suppose their dwelling was insured for $500,000, but would cost $1 million to rebuild. Their coverage limit for “other structures” was $50,000, but the only structure in that category they had was a deck that would cost $20,000 to replace.
Under the original bill, they could have applied the $50,000 to the house and not rebuilt the deck, or replaced the deck for $20,000 and applied the remaining $30,000 to the house.
Under the current version, they could not rebuild the deck and apply $20,000 to the house, but they could not transfer the remaining $30,000 because they didn’t have $30,000 in actual losses to other structures.
The amended version also took away the ability to transfer coverage from the dwelling to any other category, and from additional living expenses to any other category.
Dodd’s bill has two other provisions: If a home is totally destroyed in a declared disaster, the insurer would have to offer to renew the policy at least twice, up from once under current law. This is the only provision of his bill that would be retroactive, to July 1.
It also would require insurers to provide additional living expenses to victims of a declared disaster for up to 36 months — up to the dollar limit if there is one — if the policyholder encounters a rebuilding delay beyond their control. Today, insurers have to provide additional living expenses, up to any dollar limit, for only 24 months after widespread disasters. Richard Lane, who lost his home in Coffey Park, said that provision would help him immensely, if only it were retroactive. Lane said his State Farm policy has no cap on additional living expenses, but he can only get them for 24 months and doesn’t see how his home will be rebuilt by then. “Eight months in, we haven’t even started rebuilding my foundation yet,” he said. “Only 15 to 20 percent of Coffey Park has broken ground.”
Another Dodd bill, SB1291, would have licensed independent insurance adjusters individually, rather than licensing just the companies they work for. It died before reaching the Senate floor.
“The insurance industry has been relentless in attacking this package of commonsense proposals and has been successful in killing some of the the bills and significantly watering down others, and all those changes are to the severe detriment of survivors who have been through hell,” said Robert Herrell, the state Insurance Department’s commissioner for legislative affairs. Asked for a comment, Rebuild with Resilience, which represents four major insurance trade groups in the state, would say only, “On behalf of the millions of homeowners we insure, we want to thank the lawmakers in Sacramento who worked toward legislation that helps communities rebuild and become more resilient to natural disasters in the future while continuing to protect the affordability and accessibility of the insurance system on which our customers depend.”
Here’s a look at some of the other bills; none are retroactive.
Two sponsored by Assemblyman Marc Levine, D-San Rafael, have passed the Assembly and are headed to a Senate Insurance Committee hearing this week. AB1800 clarifies that after a total loss, policyholders who have purchased building-code upgrade and extended replacement-cost coverage can use that coverage whether they decide to rebuild at the original location, or rebuild or replace at a new location.
AB1797 would require an insurer to provide policyholders, every other year upon renewal, with an estimate of the cost to rebuild or replace the primary dwelling, with certain exceptions. Today, there is no such requirement. Many insurers simply use an inflation factor that has left many customers underinsured. Consumer Group United Policyholders surveyed North Bay fire victims, and 66 percent said their dwelling was underinsured.
AB1772, co-sponsored by Assemblywoman Cecilia Aguiar-Curry, D-Winters (Yolo County), would extend the time policyholders have to collect the full replacement cost of a loss relating to a “state of emergency” to 36 months from 24 months. It would require additional sixmonth extensions “for good cause.” It passed the Assembly and is headed to the Senate.
AB1875, sponsored by Assemblyman Jim Wood, D-Healdsburg, has passed the Assembly. It originally would have required insurers to offer replacement cost coverage at least 50 percent over the policy limits. Now it would just require insurers who don’t offer this coverage to refer customers to an online shopping tool the Insurance Department would have to create.