California Legislature—2013–14 Regular Session

Assembly BillNo. 2064


Introduced by Assembly Member Cooley

February 20, 2014


An act to amend Sections 10081, 10085, 10086, 10089.6, and 10089.26 of, to add Sections 10081.1 and 10089.42 to, and to repeal and add Sections 10089.28 and 10089.41 of, the Insurance Code, relating to earthquake insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 2064, as introduced, Cooley. Earthquake insurance: mandatory offer.

Existing law prohibits a policy of residential property insurance from being issued or delivered or initially renewed in this state unless the named insured is offered coverage for loss or damage caused by an earthquake, and, if the offer of earthquake coverage is accepted, requires the insurer to provide certain disclosures based on whether the policy was issued by the California Earthquake Authority (CEA).

Existing law created the CEA, to be administered under the authority of the Insurance Commissioner, and authorized it to transact insurance in this state as necessary to sell policies of basic residential earthquake insurance in the manner provided. The CEA has no authority to transact any other type of insurance business. The CEA’s operating expenses are capped at 3% of its premium income.

This bill would revise and recast these provisions by instead requiring insurers who are members of the CEA to provide their insureds with specified disclosures with regard to coverage of losses, the CEA’s liability limitations, and premiums concurrent with the issuance or renewal by the CEA of a residential earthquake insurance policy. The bill would also prohibit member insurers from issuing, delivering, or renewing a policy of residential property insurance in this state, unless the named insured is provided notice of the availability of residential earthquake insurance from the CEA within 60 days of issuance or renewal of the insured’s residential insurance policy, as provided. The CEA would be required to prepare the forms of notice for use by member insurers and submit the forms to the commissioner for approval. The insurers would be authorized to provide the notice electronically or by mail. The bill would provide that member insurers that fulfil the specified notice requirements would be in compliance with the earthquake insurance provisions applicable to the issuance, delivery, and renewal of a policy of residential property insurance.

This bill would increase the cap on the CEA’s operating expenses to not more than 5% of its premium income. The bill would also require that a CEA residential earthquake insurance policy be effective upon receipt by the member insurer of both the completed CEA-approved application for the policy, signed by the applicant, and either the annual premium or the first installment of the annual premium.

This bill would also make conforming changes.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 10081 of the Insurance Code is amended
2to read:

3

10081.  

begin deleteNo end deletebegin insertExcept as provided in Section 10081.1, a end insertpolicy of
4residential property insurancebegin delete mayend deletebegin insert shall notend insert be issued or delivered
5or, with respect to policies in effect on the effective date of this
6chapter, initially renewed in this state by any insurer unless the
7named insured is offered coverage for loss or damage caused by
8the peril of earthquake as provided in this chapter. That coverage
9may be provided in the policy of residential property insurance
10itself, either by specific policy provision or endorsement, or in a
11separate policy or certificate of insurancebegin delete whichend deletebegin insert thatend insert specifically
12provides coverage for loss or damage caused by the peril of
13earthquake alone or in combination with other perils.

14

SEC. 2.  

Section 10081.1 is added to the Insurance Code, to
15read:

P3    1

10081.1.  

Section 10081 does not apply to any insurer that
2participates in the California Earthquake Authority pursuant to
3Chapter 8.6 (commencing with Section 10089.5). Each insurer
4participating in the authority shall provide notice to all of its
5residential property insurance policyholders of the availability of
6earthquake insurance coverage in the manner required by Section
710089.42.

8

SEC. 3.  

Section 10085 of the Insurance Code is amended to
9read:

10

10085.  

If the insurer establishes proof of mailing or delivery
11of thebegin delete requiredend delete offerbegin insert that is required pursuant to Section 10081end insert
12 and the offer of earthquake coverage is not accepted by the named
13insured within 30 days from the date of mailing or delivery of the
14offer, there shall be a conclusive presumption that the named
15insured elected not to accept the coverage. An election, actual or
16presumed, by any named insured shall be binding upon any other
17person insured or any other party having an insurable interest in
18the insured property.

19

SEC. 4.  

Section 10086 of the Insurance Code, as amended by
20Section 14 of Chapter 369 of the Statutes of 2013, is amended to
21read:

22

10086.  

(a) If an offer of earthquake coveragebegin insert, made pursuant
23to Section 10081,end insert
is accepted, the coverage shall be continued at
24the applicable rates and conditions for the policy term, provided
25the policy of residential property insurance is not terminated by
26the named insured or insurer.

27(1) At any renewal, an insurer may modify the terms and
28conditions of an existing policy, rider, or endorsement providing
29coverage against loss or damage caused by the peril of earthquake
30if the modified terms and conditions provide the minimum
31coverages required by Section 10089.

32(2) An insurer that modifies the terms and conditions of an
33existing policy, rider, or endorsement shall provide the insured
34with the renewal notice in a stand-alone disclosure document
35stating the changes in the terms and conditions of the insured’s
36existing policy, rider, or endorsement. The offer of renewal may
37be made electronically pursuant to Section 38.5. Proof of mailing
38of the disclosure document by first-class mail to a named insured
39at the mailing address shown on the policy or application, or proof
40consistent with Section 38.5 that the offer of renewal of coverage
P4    1was sent to the named insured or applicant by electronic
2transmission, creates a conclusive presumption that the disclosure
3document was provided. The disclosure shall include the following
4statement in 14-point boldface type:
5

6“THE COVERAGE IN THE POLICY WE ARE OFFERING
7YOU WITH THIS RENEWAL HAS BEEN REDUCED, AND
8SUBSTANTIALLY DIFFERS FROM THE COVERAGES
9PROVIDED BY YOUR HOMEOWNERS’ POLICY.
10 INSURANCE COMPANIES ARE ALLOWED TO RENEW
11EARTHQUAKE INSURANCE POLICIES WITH COVERAGE
12THAT IS REDUCED FROM THE COVERAGE YOU
13PREVIOUSLY PURCHASED. YOU MAY REQUEST A
14SAMPLE COPY OF THIS NEW POLICY TO REVIEW PRIOR
15TO MAKING A DECISION TO ACCEPT THIS RENEWAL,
16AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
17DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE
18COPY SHALL NOT CHANGE OR EXTEND THE POLICY
19EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
20A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS
21NOTICE.”
22

23The commissioner shall approve the form of the summary at the
24time he or she approves the policy. The summary shall include the
25information contained in subdivision (a) of Section 10083, and
26may be included with the renewal notice in standard type.

27The commissioner may approve substantially similar disclosure
28forms if necessary to accurately disclose relevant information to
29the policyholder. The commissioner may also approve disclosure
30forms substantially similar to the disclosure statement required by
31Section 10083 if necessary to accurately disclose relevant
32information to the policyholder.

begin delete

33(3) If the earthquake coverage is provided by a policy issued
34by the California Earthquake Authority, the following disclosure
35shall be provided in 14-point boldface type:

363738CALIFORNIA EARTHQUAKE AUTHORITY POLICY
39DISCLOSURE
40

P5    1THIS POLICY IS BEING PURCHASED FROM THE
2CALIFORNIA EARTHQUAKE AUTHORITY (“CEA”). THE
3COVERAGE IN THIS CEA POLICY SUBSTANTIALLY
4DIFFERS FROM THE COVERAGES PROVIDED IN YOUR
5HOMEOWNER’S POLICY. THE CEA IS NOT PART OF OR
6ASSOCIATED WITH YOUR HOMEOWNER’S INSURANCE
7COMPANY. IF LOSSES AS A RESULT OF AN EARTHQUAKE
8OR A SERIES OF EARTHQUAKES EXCEED THE
9AVAILABLE RESOURCES OF THE CEA, THIS POLICY IS
10NOT COVERED BY THE CALIFORNIA INSURANCE
11GUARANTY ASSOCIATION. THEREFORE, THE
12CALIFORNIA INSURANCE GUARANTY ASSOCIATION
13WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR
14ASSETS IF THE CEA BECOMES INSOLVENT AND IS
15UNABLE TO MAKE PAYMENTS AS PROMISED. IN
16ADDITION, YOUR CEA POLICY MAY BE SUBJECT TO
17FUTURE SURCHARGES OF THE POLICY PREMIUM IN
18CERTAIN CASES WHERE AN EARTHQUAKE OR SERIES
19OF EARTHQUAKES HAS EXCEEDED AVAILABLE
20RESOURCES TO PAY CLAIMS. IN THAT CASE, THIS
21MEANS THAT IN ADDITION TO THE ANNUAL PREMIUM,
22YOU MAY BE CHARGED UP TO AN ADDITIONAL 20% OF
23THE PREMIUM.

end delete

24(b) If the offerbegin insert of earthquake coverage made pursuant to Section
2510081end insert
is not accepted, the insurer or any affiliated insurer shall be
26required on an every other year basis to offer earthquake coverage
27in connection with any continuation, renewal, or reinstatement of
28the policy following any lapse thereof, or with respect to any other
29policy that extends, changes, supersedes, or replaces the policy of
30residential property insurance. The offer may be made
31electronically pursuant to Section 38.5.

32(c) Nothing in this section shall preclude the named insured
33from terminating the earthquake coverage at any time.

34(d) This section shall remain in effect only until January 1, 2019,
35and as of that date is repealed, unless a later enacted statute, that
36is enacted before January 1, 2019, deletes or extends that date.

37

SEC. 5.  

Section 10086 of the Insurance Code, as added by
38Section 15 of Chapter 369 of the Statutes of 2013, is amended to
39read:

P6    1

10086.  

(a) If an offer of earthquake coveragebegin insert, made pursuant
2to Section 10081,end insert
is accepted, the coverage shall be continued at
3the applicable rates and conditions for the policy term, provided
4the policy of residential property insurance is not terminated by
5the named insured or insurer.

6(1) At any renewal, an insurer may modify the terms and
7conditions of an existing policy, rider, or endorsement providing
8coverage against loss or damage caused by the peril of earthquake
9if the modified terms and conditions provide the minimum
10coverages required by Section 10089.

11(2) An insurer that modifies the terms and conditions of an
12existing policy, rider, or endorsement shall provide the insured
13with the renewal notice in a stand-alone disclosure document
14stating the changes in the terms and conditions of the insured’s
15existing policy, rider, or endorsement. Proof of mailing of the
16disclosure document by first-class mail to a named insured at the
17mailing address shown on the policy or application creates a
18conclusive presumption that the disclosure document was provided.
19The disclosure shall include the following statement in 14-point
20boldface type:

21

22“THE COVERAGE IN THE POLICY WE ARE OFFERING
23YOU WITH THIS RENEWAL HAS BEEN REDUCED, AND
24SUBSTANTIALLY DIFFERS FROM THE COVERAGES
25PROVIDED BY YOUR HOMEOWNERS’ POLICY.
26INSURANCE COMPANIES ARE ALLOWED TO RENEW
27EARTHQUAKE INSURANCE POLICIES WITH COVERAGE
28THAT IS REDUCED FROM THE COVERAGE YOU
29PREVIOUSLY PURCHASED. YOU MAY REQUEST A
30SAMPLE COPY OF THIS NEW POLICY TO REVIEW PRIOR
31TO MAKING A DECISION TO ACCEPT THIS RENEWAL,
32AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
33DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE
34COPY SHALL NOT CHANGE OR EXTEND THE POLICY
35EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
36A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS
37NOTICE.”

38

39The commissioner shall approve the form of the summary at the
40time he or she approves the policy. The summary shall include the
P7    1information contained in subdivision (a) of Section 10083, and
2may be included with the renewal notice in standard type.

3The commissioner may approve substantially similar disclosure
4forms if necessary to accurately disclose relevant information to
5the policyholder. The commissioner may also approve disclosure
6forms substantially similar to the disclosure statement required by
7Section 10083 if necessary to accurately disclose relevant
8information to the policyholder.

begin delete

9(3) If the earthquake coverage is provided by a policy issued
10by the California Earthquake Authority, the following disclosure
11shall be provided in 14-point boldface type:

12CALIFORNIA EARTHQUAKE AUTHORITY POLICY
13DISCLOSURE

14THIS POLICY IS BEING PURCHASED FROM THE
15CALIFORNIA EARTHQUAKE AUTHORITY (“CEA”). THE
16COVERAGE IN THIS CEA POLICY SUBSTANTIALLY
17DIFFERS FROM THE COVERAGES PROVIDED IN YOUR
18HOMEOWNER’S POLICY. THE CEA IS NOT PART OF OR
19ASSOCIATED WITH YOUR HOMEOWNER’S INSURANCE
20COMPANY. IF LOSSES AS A RESULT OF AN EARTHQUAKE
21OR A SERIES OF EARTHQUAKES EXCEED THE
22AVAILABLE RESOURCES OF THE CEA, THIS POLICY IS
23NOT COVERED BY THE CALIFORNIA INSURANCE
24GUARANTY ASSOCIATION. THEREFORE, THE
25CALIFORNIA INSURANCE GUARANTY ASSOCIATION
26WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR
27ASSETS IF THE CEA BECOMES INSOLVENT AND IS
28UNABLE TO MAKE PAYMENTS AS PROMISED. IN
29ADDITION, YOUR CEA POLICY MAY BE SUBJECT TO
30FUTURE SURCHARGES OF THE POLICY PREMIUM IN
31CERTAIN CASES WHERE AN EARTHQUAKE OR SERIES
32OF EARTHQUAKES HAS EXCEEDED AVAILABLE
33RESOURCES TO PAY CLAIMS. IN THAT CASE, THIS
34MEANS THAT IN ADDITION TO THE ANNUAL PREMIUM,
35YOU MAY BE CHARGED UP TO AN ADDITIONAL 20% OF
36THE PREMIUM.

end delete

37(b) If the offerbegin insert of earthquake coverage made pursuant to Section
3810081end insert
is not accepted, the insurer or any affiliated insurer shall be
39required on an every other year basis to offer earthquake coverage
40in connection with any continuation, renewal, or reinstatement of
P8    1the policy following any lapse thereof, or with respect to any other
2policy that extends, changes, supersedes, or replaces the policy of
3residential property insurance.

4(c) Nothing in this section shall preclude the named insured
5from terminating the earthquake coverage at any time.

6(d) This section shall become operative on January 1, 2019.

7

SEC. 6.  

Section 10089.6 of the Insurance Code is amended to
8read:

9

10089.6.  

(a) There is hereby created the California Earthquake
10Authority, which shall be administered under the authority of the
11commissioner and have the powers conferred by this chapter. The
12authority shall be authorized to transact insurance in this state as
13necessary to sell policies of basic residential earthquake insurance
14in the manner set forth in Sections 10089.26, 10089.27, and
1510089.28. The authority shall have no authority to transact any
16other type of insurance business.

17(b) (1) The investments of the authority shall be limited to those
18securities eligible under Section 16430 of the Government Code.

19(2) The rights, obligations, and duties owed by the authority to
20its insureds, beneficiaries of insureds, and applicants for insurance
21shall be the same as the rights, obligations, and duties owed by
22insurers to its insureds, beneficiaries of insureds and applicants
23for insurance under common law, regulations, and statutes. The
24authority shall be liable to its insureds, beneficiaries of insureds,
25and applicants for insurance as an insurer is liable to its insureds,
26beneficiaries of insureds, and applicants for insurance under
27common law, regulations, and statutes.

28(c) The operating expenses of the authority shall be capped at
29not more thanbegin delete 3 percentend deletebegin insert 5 percentend insert of the premium income received
30by the authority. The funds shall be available to pay any advocacy
31fees awarded in a proceeding under subdivision (c) of Section
3210089.11.

33

SEC. 7.  

Section 10089.26 of the Insurance Code is amended
34to read:

35

10089.26.  

(a) begin insert(1)end insertbegin insertend insert The authority shall issue policies of basic
36residential earthquake insurance, including earthquake loss
37assessment policies for individual condominium unit properties,
38to any owner of a qualifying residential property, as long as the
39owner has secured a policy of residential property insurance from
40a participating insurer.

begin insert

P9    1(2) A policy of residential earthquake insurance written by the
2authority shall be effective upon receipt by the participating insurer
3of both of the following:

end insert
begin insert

4(A) The completed authority-approved application for the policy,
5signed by the applicant.

end insert
begin insert

6(B) Either the annual premium or the first installment of the
7annual premium.

end insert
begin delete

8(1)

end delete

9begin insert(b)end insert For purposes of this section, earthquake loss assessment
10coverage shall be issued in a minimum amount of fifty thousand
11dollars ($50,000) for individual condominium units valued at more
12than one hundred thirty-five thousand dollars ($135,000).
13Earthquake loss assessment coverage shall be issued in a minimum
14amount of twenty-five thousand dollars ($25,000) for individual
15condominium units of one hundred thirty-five thousand dollars
16($135,000) in value or less. The value of the land shall be excluded
17when determining the value of the condominium, as it relates to
18the earthquake loss assessment coverage offered by the authority.

begin delete

19(2)

end delete

20begin insert(c)end insert The panel shall submit to the board, and the board shall
21approve, rates for earthquake loss assessment coverage that
22reasonably balance the earthquake loss assessment coverages
23offered and the potential exposure to earthquake loss resulting
24from an earthquake loss assessment policy as compared to the
25coverages offered and the potential exposure to earthquake loss
26resulting from residential property other than individual
27condominium policies.

begin delete

28 It

end delete

29begin insert(d)end insertbegin insertend insertbegin insertItend insert is the intent of the Legislature, to the extent practicable,
30that rates charged by the authority to condominium loss assessment
31policyholders and residential property owner policyholders are
32treated equitably, and that a proportionate share of premiums is
33paid for potential exposure to loss, to the authority.

begin delete

34(b)

end delete

35begin insert(e)end insert Nothing in this section shall prohibit a participating or
36nonparticipating insurer from offering a condominium earthquake
37loss assessment policy for different amounts of coverage other
38than those offered by the authority.

39

SEC. 8.  

Section 10089.28 of the Insurance Code is repealed.

begin delete
P10   1

10089.28.  

(a) All policies of residential earthquake insurance
2provided by the authority shall be written by the authority.
3Authority policies shall be marketed and policyholders serviced
4by the participating insurer that writes the underlying policy of
5residential property insurance, and participating insurers shall be
6reasonably compensated for the claims and policyholder services
7they provide on behalf of the authority. Authority services may be
8performed on behalf of the authority in any reasonable manner by
9the participating insurer that is in compliance with statutory,
10regulatory, and case laws regarding claims handling practices;
11provided, however, where the authority has promulgated specific
12procedures to govern its operations, the participating insurer shall
13conform its practices to those procedures. The authority procedures
14shall comply with statutory, regulatory, and case law governing
15claims handling practices. Nothing in this provision shall be
16deemed or construed to affect any duty or liability of the authority
17or participating carrier as set forth in paragraphs (2) and (3) of
18subdivision (e) of Section 10089.7.

19(b) The participating insurer shall notify each of its insureds
20that the authority is the provider of earthquake coverage under the
21policy. The form and method of notice shall meet standards
22established by the commissioner by regulation. The authority shall
23provide to participating insurers appropriate applications and forms
24and shall maintain records of all policies written, moneys received,
25and claims paid.

26(c) The duty of an agent or broker to investigate the financial
27condition of the authority before placement of insurance shall be
28the same as the duty of an agent or broker to investigate the
29financial condition of an admitted insurer before placement of a
30policy of insurance.

end delete
31

SEC. 9.  

Section 10089.28 is added to the Insurance Code, to
32read:

33

10089.28.  

(a) All policies of residential earthquake insurance
34provided by the authority shall be written by the authority.
35Authority policies shall be marketed and policyholders serviced
36by the participating insurer that writes the underlying policy of
37residential property insurance, and participating insurers shall be
38reasonably compensated for the claims and policyholder services
39they provide on behalf of the authority. Authority services may be
40performed on behalf of the authority in any reasonable manner by
P11   1the participating insurer that is in compliance with statutory,
2regulatory, and case laws regarding claims handling practices;
3provided, however, where the authority has promulgated specific
4procedures to govern its operations, the participating insurer shall
5conform its practices to those procedures. The authority procedures
6shall comply with statutory, regulatory, and case law governing
7claims handling practices. Nothing in this provision shall be
8deemed or construed to affect any duty or liability of the authority
9or participating carrier as set forth in paragraphs (2) and (3) of
10subdivision (e) of Section 10089.7.

11(b) Concurrent with the issuance or renewal by the authority of
12a residential earthquake insurance policy, the participating insurer
13shall provide the following disclosure to the insured in 14-point
14boldface type:

15

16“California Earthquake Authority Policy Disclosure

17You have purchased a California Earthquake Authority (CEA)
18earthquake insurance policy, which can help you cover the cost of
19repairing damage to your property and possessions caused by an
20earthquake.

21The CEA is not part of your homeowners’ insurance company.

22Please keep in mind these important things about your CEA
23insurance policy:

241. CEA policy coverages are different from the coverages
25provided in your homeowners insurance policy. For example, this
26policy does not cover earthquake damage to swimming pools, and
27it may provide more limited coverage for chimneys, outbuildings,
28and masonry fences. These are examples of possible differences
29between your CEA policy and your homeowners’ policy, and you
30should consult your CEA policy to understand the types of losses
31that are limited or excluded and those that are covered.

322. If CEA’s liability for earthquake losses exceeds the CEA’s
33available resources the CEA may reduce its payment to you or pay
34you in installments. This policy is not covered by the California
35Insurance Guarantee Association and therefore the California
36Insurance Guarantee Association will not pay your claims if the
37CEA becomes insolvent and is unable to make payments as
38promised.

393. In certain cases, your CEA policy premium may be subject
40to future surcharges if the CEA’s obligations to pay earthquake
P12   1losses rise to a pre-defined level. In that case, in addition to your
2annual premium you may be charged up to an additional 20% of
3that premium.”

4

5(c) The authority shall provide to participating insurers
6appropriate applications and forms and shall maintain records of
7all policies written, moneys received, and claims paid.

8(d) The duty of an agent or broker to investigate the financial
9condition of the authority before placement of insurance shall be
10the same as the duty of an agent or broker to investigate the
11financial condition of an admitted insurer before placement of a
12 policy of insurance.

13

SEC. 10.  

Section 10089.41 of the Insurance Code is repealed.

begin delete
14

10089.41.  

(a) The offer of an authority policy by a participating
15insurer shall constitute a mode of insurer compliance with Chapter
168.5 (commencing with Section 10081) of Part 1 of Division 2, and
17as set forth in Section 10084.

18(b) If the authority ceases operation for any reason, including,
19but not limited to, repeal of this chapter or insolvency of the
20authority, participating carriers shall no longer be able to satisfy
21the requirement to offer residential earthquake insurance coverage
22by placement within the authority. The commissioner shall adopt
23a schedule in accordance with subdivision (a) of Section 10089.35
24to establish when participating carriers shall be required to offer
25coverage by another mode authorized pursuant to Chapter 8.5
26(commencing with Section 10081) of Part 1 of Division 2 to those
27policyholders for whom they write the underlying policies of
28residential property insurance.

29(c) If the authority ceases operation pursuant to a statute enacted
30by the Legislature, that statute shall determine the duty of
31participating insurers to provide earthquake insurance pursuant to
32Chapter 8.5 (commencing with Section 10081). Chapter 8.5
33(commencing with Section 10081) shall remain in effect unless
34specifically repealed by that statute.

end delete
35

SEC. 11.  

Section 10089.41 is added to the Insurance Code, to
36read:

37

10089.41.  

(a) Compliance with the provisions of Section
3810089.42 by a participating insurer shall also constitute compliance
39by that participating insurer with Chapter 8.5 (commencing with
40Section 10081).

P13   1(b) If the authority ceases operation for any reason, including,
2but not limited to, the repeal of this chapter or insolvency of the
3authority, participating carriers shall be required to offer residential
4earthquake insurance coverage pursuant to Section 10081. The
5commissioner shall adopt a schedule in accordance with
6subdivision (a) of Section 10089.35 to establish when participating
7carriers shall be required to offer coverage pursuant to Section
810081 to those policyholders for whom they write the underlying
9policies of residential property insurance.

10(c) If the authority ceases operation pursuant to a statute enacted
11by the Legislature, that statute shall determine the duty of
12participating insurers to provide earthquake insurance pursuant to
13Chapter 8.5 (commencing with Section 10081). Chapter 8.5
14(commencing with Section 10081) shall remain in effect unless
15specifically repealed by that statute.

16

SEC. 12.  

Section 10089.42 is added to the Insurance Code, to
17read:

18

10089.42.  

(a) A policy of residential property insurance shall
19not be issued, delivered, or renewed in this state, by any
20participating insurer unless the named insured is provided notice
21of the availability of residential earthquake insurance from the
22authority within 60 days of issuance or renewal of the insured’s
23residential insurance policy. The notice required by this subdivision
24shall do all of the following:

25(1) Notify the insured that the residential property insurance
26policy does not provide coverage for loss or damage caused by
27the peril of earthquake.

28(2) Disclose that the insured can apply at any time through the
29participating insurer for insurance issued by the authority that
30 covers loss or damage caused by the peril of earthquake.

31(3) Notify the insured that a policy of residential earthquake
32insurance from the authority provides different protection, and in
33some cases less protection, than the residential property insurance
34policy.

35(4) Inform the insured of the amounts of premium and deductible
36applicable to base-limits authority earthquake insurance coverage.

37(5) Direct the insured to an Internet Web site maintained by the
38participating insurer or by the authority, or jointly by both, where
39the insured can obtain premium estimates and information on
40additional earthquake insurance coverages, coverage limits,
P14   1deductibles, and other policy and coverage features for a residential
2earthquake insurance policy from the authority.

3(6) Direct the insured to an Internet Web site or toll-free
4telephone number, or both, where the insured can be referred to
5or speak with a representative or broker-agent of the participating
6insurer who can facilitate the preparation and receipt of an
7application for residential earthquake insurance written by the
8authority.

9(b) The participating insurer may, but shall not be required to,
10provide notice under this section to any insured who has purchased
11through that participating insurer, and has in force, a residential
12earthquake insurance policy written by the authority.

13(c) The authority shall prepare forms of notice for use by
14participating insurers and submit them to the commissioner for
15approval. The commissioner shall approve a form of notice if it
16accurately discloses the information required by subdivision (a).
17Forms of notice are not required to be reproduced in identical form
18to the disclosures and advice set forth in subdivision (a), and they
19may contain provisions additional to those set forth in subdivision
20(a) if the additional provisions do not conflict with this section.

21(d) (1) The notice required by this section may be made
22electronically pursuant to Section 38.5.

23(2) Proof of mailing of any notice required by this section by
24first-class mail to a named insured at the mailing address shown
25on the policy or application, or proof consistent with Section 38.5
26that the notice was sent to the named insured or applicant by
27electronic transmission, creates a conclusive presumption that the
28notice required by this section was provided.



O

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