BILL NUMBER: AB 2735	INTRODUCED
	BILL TEXT


INTRODUCED BY   Committee on Insurance (Assembly Members Perea
(Chair), Bradford, Ian Calderon, Cooley, Dababneh, Frazier, Gonzalez,
V. Manuel Pérez, and Wieckowski)

                        FEBRUARY 25, 2014

   An act to amend Section 10086 of the Insurance Code, relating to
earthquake insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2735, as introduced, Committee on Insurance. Earthquake
insurance.
   Existing law prohibits a policy of residential property insurance
from being issued or delivered unless the named insured is offered
coverage for loss or damage caused by an earthquake, and specifies
the minimum coverage that is required to be offered. If an offer of
earthquake coverage is not accepted, insurers are required to
subsequently offer earthquake coverage to residential policyholders
on an every other year basis.
   This bill would exempt those insurers whose insureds have accepted
earthquake coverage that does not meet the minimum coverage
requirement but has been approved by the Insurance Commissioner from
being required to offer earthquake coverage meeting the minimum
coverage requirements at any renewal if the insurer has offered a
renewal of that policy and has provided written notice with that
renewal regarding additional earthquake coverage available.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 10086 of the Insurance Code, as amended by
Section 14 of Chapter 369 of the Statutes of 2013, is amended to
read:
   10086.  (a) If an offer of earthquake coverage is accepted, the
coverage shall be continued at the applicable rates and conditions
for the policy term, provided the policy of residential property
insurance is not terminated by the named insured or insurer.
   (1) At any renewal, an insurer may modify the terms and conditions
of an existing policy, rider, or endorsement providing coverage
against loss or damage caused by the peril of earthquake if the
modified terms and conditions provide the minimum coverages required
by Section 10089.
   (2) An insurer that modifies the terms and conditions of an
existing policy, rider, or endorsement shall provide the insured with
the renewal notice in a stand-alone disclosure document stating the
changes in the terms and conditions of the insured's existing policy,
rider, or endorsement. The offer of renewal may be made
electronically pursuant to Section 38.5. Proof of mailing of the
disclosure document by first-class mail to a named insured at the
mailing address shown on the policy or application, or proof
consistent with Section 38.5 that the offer of renewal of coverage
was sent to the named insured or applicant by electronic
transmission, creates a conclusive presumption that the disclosure
document was provided. The disclosure shall include the following
statement in 14-point boldface type:

   THE COVERAGE IN THE POLICY WE ARE OFFERING YOU WITH THIS RENEWAL
HAS BEEN REDUCED, AND SUBSTANTIALLY DIFFERS FROM THE COVERAGES
PROVIDED BY YOUR HOMEOWNERS' POLICY. INSURANCE COMPANIES ARE ALLOWED
TO RENEW EARTHQUAKE INSURANCE POLICIES WITH COVERAGE THAT IS REDUCED
FROM THE COVERAGE YOU PREVIOUSLY PURCHASED. YOU MAY REQUEST A SAMPLE
COPY OF THIS NEW POLICY TO REVIEW PRIOR TO MAKING A DECISION TO
ACCEPT THIS RENEWAL, AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE COPY SHALL NOT CHANGE
OR EXTEND THE POLICY EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS NOTICE.

   The commissioner shall approve the form of the summary at the time
he or she approves the policy. The summary shall include the
information contained in subdivision (a) of Section 10083, and may be
included with the renewal notice in standard type.
   The commissioner may approve substantially similar disclosure
forms if necessary to accurately disclose relevant information to the
policyholder. The commissioner may also approve disclosure forms
substantially similar to the disclosure statement required by Section
10083 if necessary to accurately disclose relevant information to
the policyholder.
   (3) If the earthquake coverage is provided by a policy issued by
the California Earthquake Authority, the following disclosure shall
be provided in 14-point boldface type:
      CALIFORNIA EARTHQUAKE AUTHORITY POLICY DISCLOSURE

   THIS POLICY IS BEING PURCHASED FROM THE CALIFORNIA EARTHQUAKE
AUTHORITY ("CEA"). THE COVERAGE IN THIS CEA POLICY SUBSTANTIALLY
DIFFERS FROM THE COVERAGES PROVIDED IN YOUR HOMEOWNER'S POLICY. THE
CEA IS NOT PART OF OR ASSOCIATED WITH YOUR HOMEOWNER'S INSURANCE
COMPANY. IF LOSSES AS A RESULT OF AN EARTHQUAKE OR A SERIES OF
EARTHQUAKES EXCEED THE AVAILABLE RESOURCES OF THE CEA, THIS POLICY IS
NOT COVERED BY THE CALIFORNIA INSURANCE GUARANTY ASSOCIATION.
THEREFORE, THE CALIFORNIA INSURANCE GUARANTY ASSOCIATION WILL NOT PAY
YOUR CLAIMS OR PROTECT YOUR ASSETS IF THE CEA BECOMES INSOLVENT AND
IS UNABLE TO MAKE PAYMENTS AS PROMISED. IN ADDITION, YOUR CEA POLICY
MAY BE SUBJECT TO FUTURE SURCHARGES OF THE POLICY PREMIUM IN CERTAIN
CASES WHERE AN EARTHQUAKE OR SERIES OF EARTHQUAKES HAS EXCEEDED
AVAILABLE RESOURCES TO PAY CLAIMS. IN THAT CASE, THIS MEANS THAT IN
ADDITION TO THE ANNUAL PREMIUM, YOU MAY BE CHARGED UP TO AN
ADDITIONAL 20% OF THE PREMIUM.

   (b) (1) If the insurer offers policies providing earthquake
coverage, other than the coverage specified in subdivisions (a) and
(b) of Section 10089, pursuant to a rate application approved by the
commissioner in accordance with subdivision (c) of Section 10089, and
an offer of that policy has been accepted, no further or other offer
of earthquake coverage meeting the minimum coverage requirements is
required at any renewal if the insurer has done both of the
following:  
   (A) Offered a renewal of that policy.  
   (B) Has provided written notice with that renewal regarding
additional earthquake coverage available.  
   (2) The form of the written notice shall be filed with the
commissioner at least 30 days prior to its first use and shall not be
used if the commissioner disapproves the form of the written notice
as being misleading or incomplete within that period.  
   (b) 
    (c)  If the offer is not accepted, the insurer or any
affiliated insurer shall be required on an every other year basis to
offer earthquake coverage in connection with any continuation,
renewal, or reinstatement of the policy following any lapse thereof,
or with respect to any other policy that extends, changes,
supersedes, or replaces the policy of residential property insurance.
The offer may be made electronically pursuant to Section 38.5.

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

   (d) 
    (e)  This section shall remain in effect only until
January 1, 2019, and as of that date is repealed, unless a later
enacted statute, that is enacted before January 1, 2019, deletes or
extends that date.
  SEC. 2.  Section 10086 of the Insurance Code, as added by Section
15 of Chapter 369 of the Statutes of 2013, is amended to read:
   10086.  (a) If an offer of earthquake coverage is accepted, the
coverage shall be continued at the applicable rates and conditions
for the policy term, provided the policy of residential property
insurance is not terminated by the named insured or insurer.
   (1) At any renewal, an insurer may modify the terms and conditions
of an existing policy, rider, or endorsement providing coverage
against loss or damage caused by the peril of earthquake if the
modified terms and conditions provide the minimum coverages required
by Section 10089.
   (2) An insurer that modifies the terms and conditions of an
existing policy, rider, or endorsement shall provide the insured with
the renewal notice in a stand-alone disclosure document stating the
changes in the terms and conditions of the insured's existing policy,
rider, or endorsement. Proof of mailing of the disclosure document
by first-class mail to a named insured at the mailing address shown
on the policy or application creates a conclusive presumption that
the disclosure document was provided. The disclosure shall include
the following statement in 14-point boldface type:
   THE COVERAGE IN THE POLICY WE ARE OFFERING YOU WITH THIS RENEWAL
HAS BEEN REDUCED, AND SUBSTANTIALLY DIFFERS FROM THE COVERAGES
PROVIDED BY YOUR HOMEOWNERS' POLICY. INSURANCE COMPANIES ARE ALLOWED
TO RENEW EARTHQUAKE INSURANCE POLICIES WITH COVERAGE THAT IS REDUCED
FROM THE COVERAGE YOU PREVIOUSLY PURCHASED. YOU MAY REQUEST A SAMPLE
COPY OF THIS NEW POLICY TO REVIEW PRIOR TO MAKING A DECISION TO
ACCEPT THIS RENEWAL, AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE COPY SHALL NOT CHANGE
OR EXTEND THE POLICY EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS NOTICE.
   The commissioner shall approve the form of the summary at the time
he or she approves the policy. The summary shall include the
information contained in subdivision (a) of Section 10083, and may be
included with the renewal notice in standard type.
   The commissioner may approve substantially similar disclosure
forms if necessary to accurately disclose relevant information to the
policyholder. The commissioner may also approve disclosure forms
substantially similar to the disclosure statement required by Section
10083 if necessary to accurately disclose relevant information to
the policyholder.
   (3) If the earthquake coverage is provided by a policy issued by
the California Earthquake Authority, the following disclosure shall
be provided in 14-point boldface type:
   CALIFORNIA EARTHQUAKE AUTHORITY POLICY DISCLOSURE
   THIS POLICY IS BEING PURCHASED FROM THE CALIFORNIA EARTHQUAKE
AUTHORITY ("CEA"). THE COVERAGE IN THIS CEA POLICY SUBSTANTIALLY
DIFFERS FROM THE COVERAGES PROVIDED IN YOUR HOMEOWNER'S POLICY. THE
CEA IS NOT PART OF OR ASSOCIATED WITH YOUR HOMEOWNER'S INSURANCE
COMPANY. IF LOSSES AS A RESULT OF AN EARTHQUAKE OR A SERIES OF
EARTHQUAKES EXCEED THE AVAILABLE RESOURCES OF THE CEA, THIS POLICY IS
NOT COVERED BY THE CALIFORNIA INSURANCE GUARANTY ASSOCIATION.
THEREFORE, THE CALIFORNIA INSURANCE GUARANTY ASSOCIATION WILL NOT PAY
YOUR CLAIMS OR PROTECT YOUR ASSETS IF THE CEA BECOMES INSOLVENT AND
IS UNABLE TO MAKE PAYMENTS AS PROMISED. IN ADDITION, YOUR CEA POLICY
MAY BE SUBJECT TO FUTURE SURCHARGES OF THE POLICY PREMIUM IN CERTAIN
CASES WHERE AN EARTHQUAKE OR SERIES OF EARTHQUAKES HAS EXCEEDED
AVAILABLE RESOURCES TO PAY CLAIMS. IN THAT CASE, THIS MEANS THAT IN
ADDITION TO THE ANNUAL PREMIUM, YOU MAY BE CHARGED UP TO AN
ADDITIONAL 20% OF THE PREMIUM. 
   (b) (1) If the insurer offers policies providing earthquake
coverage, other than the coverage specified in subdivisions (a) and
(b) of Section 10089, pursuant to a rate application approved by the
commissioner in accordance with subdivision (c) of Section 10089, and
an offer of that policy has been accepted, no further or other offer
of earthquake coverage meeting the minimum coverage requirements is
required at any renewal if the insurer has done both of the
following:  
   (A) Offered a renewal of that policy.  
   (B) Has provided written notice with that renewal regarding
additional earthquake coverage available.  
   (2) The form of the written notice shall be filed with the
commissioner at least 30 days prior to its first use and shall not be
used if the commissioner disapproves the form of the written notice
as being misleading or incomplete within that period.  
   (b) 
    (c)  If the offer is not accepted, the insurer or any
affiliated insurer shall be required on an every other year basis to
offer earthquake coverage in connection with any continuation,
renewal, or reinstatement of the policy following any lapse thereof,
or with respect to any other policy that extends, changes,
supersedes, or replaces the policy of residential property insurance.

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

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