BILL NUMBER: AB 2199 CHAPTERED 08/25/04 CHAPTER 311 FILED WITH SECRETARY OF STATE AUGUST 25, 2004 APPROVED BY GOVERNOR AUGUST 25, 2004 PASSED THE ASSEMBLY AUGUST 12, 2004 PASSED THE SENATE JULY 12, 2004 AMENDED IN SENATE JULY 2, 2004 AMENDED IN SENATE JUNE 22, 2004 AMENDED IN ASSEMBLY MAY 17, 2004 AMENDED IN ASSEMBLY APRIL 29, 2004 INTRODUCED BY Assembly Member Kehoe (Coauthors: Assembly Members Bogh, Calderon, Cohn, Dutra, Jerome Horton, Koretz, Mountjoy, Nakano, Ridley-Thomas, and Vargas) FEBRUARY 18, 2004 An act to add Section 2051.5 to the Insurance Code, relating to fire insurance, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 2199, Kehoe. Fire insurance: indemnity. Under existing law, under an open policy, the measure of indemnity in fire insurance is the expense to the insured of replacing the thing lost or injured in its condition at the time of the injury, the expense being computed as of the time of the commencement of the fire. This bill would provide that under an open policy that requires payment of the replacement cost for a loss, the measure of indemnity is the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less. This bill would require that no time limit less than specified periods from the date that the first payment toward the actual cash value is made be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit. This bill would prohibit any policy issued or delivered in this state from containing a provision that limits or denies payment of the replacement cost of the insured structure in the event the insured decides to rebuild or replace the property at a location other than the insured premises, as specified. The bill would provide that insurers shall not be required to modify policy forms to be consistent with these provisions until July 1, 2005. The bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 2051.5 is added to the Insurance Code, to read: 2051.5. (a) Under an open policy that requires payment of the replacement cost for a loss, the measure of indemnity is the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less. If the policy requires the insured to repair, rebuild, or replace the damaged property in order to collect the full replacement cost, the insurer shall pay the actual cash value of the damaged property, as defined in Section 2051, until the damaged property is repaired, rebuilt, or replaced. Once the property is repaired, rebuilt, or replaced, the insurer shall pay the difference between the actual cash value payment made and the full replacement cost reasonably paid to replace the damaged property, up to the limits stated in the policy. (b) No time limit of less than 12 months from the date that the first payment toward the actual cash value is made shall be placed upon an insured in order to collect the full replacement cost of the loss, subject to the policy limit. Additional extensions of six months shall be provided to policyholders for good cause. In the event of a loss relating to a "state of emergency," as defined in Section 8558 of the Government Code, no time limit of less than 24 months from the date that the first payment toward the actual cash value is made shall be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit. Nothing in this section shall prohibit the insurer from allowing the insured additional time to collect the full replacement cost. (c) In the event of a total loss of the insured structure, no policy issued or delivered in this state may contain a provision that limits or denies payment of the replacement cost in the event the insured decides to rebuild or replace the property at a location other than the insured premises. However, the measure of indemnity shall be based upon the replacement cost of the insured property and shall not be based upon the cost to repair, rebuild, or replace at a location other than the insured premises. (d) Nothing in this section shall prohibit an insurer from restricting payment in cases of suspected fraud. (e) The changes made to this section by the act that added this subdivision shall be implemented by an insurer on and after the effective date of that act, except that an insurer shall not be required to modify policy forms to be consistent with those changes until July 1, 2005. On and after July 1, 2005, all policy forms used by an insurer shall reflect those changes. SEC. 2. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to protect consumers of insurance who suffer the loss of their homes or other structures, it is necessary that this act take effect immediately.