BILL NUMBER: AB 2735 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 11, 2014
AMENDED IN ASSEMBLY MARCH 27, 2014
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 Sections 10083 and 10086.1 of the Insurance Code,
relating to earthquake insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2735, as amended, Committee on Insurance. Earthquake insurance.
Existing law provides that a policy of residential property
insurance may not be issued or delivered or, under certain
circumstances, initially renewed by an insurer unless the named
insured is offered coverage for loss or damage caused by an
earthquake. The required offer of earthquake coverage is authorized
to be made prior to, concurrent with, or within 60 days following the
issuance or renewal of a residential property insurance policy. 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 provide that if an insurer offers
specified insurance policies providing earthquake coverage that is
greater than the minimum requirements, and an offer of one of those
policies has been accepted, no further or other offer of earthquake
coverage meeting the minimum earthquake coverage requirements is
required at a renewal, if the insurer has offered a renewal of that
policy and has provided written notice with that renewal regarding
additional earthquake coverage that is available.
issues a policy with earthquake coverage that does not meet the
minimum coverage requirements, no further or other offer of
earthquake coverage meeting the minimum coverage requirements and no
further or other notice of noncoverage is required by the insurer if
a renewal of that policy is offered, and a written notice is provided
with that renewal regarding additional earthquake coverage that is
available. The bill would require the form of that written
notice to be approved by the Insurance Commissioner, as specified.
The bill would also make additional 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:
SECTION 1. Section 10083 of the Insurance Code, as amended by
Section 12 of Chapter 369 of the Statutes of 2013, is amended to
read:
10083. (a) The offer of coverage required by Section 10081 may be
made prior to, concurrent with, or within 60 days following the
issuance or renewal of a residential property insurance policy. If
the offer of coverage is mailed to the named insured or applicant, it
shall be mailed to the mailing address shown on the policy of
residential property insurance or on the application. The offer may
be made electronically pursuant to Section 38.5. The offer of
earthquake coverage shall contain the following language in at least
10-point boldface type:
YOUR POLICY DOES NOT PROVIDE COVERAGE AGAINST THE PERIL OF
EARTHQUAKE.
CALIFORNIA LAW REQUIRES THAT EARTHQUAKE COVERAGE BE OFFERED TO YOU
AT YOUR OPTION.
WARNING: THESE COVERAGES MAY DIFFER SUBSTANTIALLY FROM AND PROVIDE
LESS PROTECTION THAN THE COVERAGE PROVIDED BY YOUR HOMEOWNERS'
INSURANCE POLICY. THERE ARE EXCLUSIONS AND LIMITATIONS SUCH AS
OUTBUILDINGS, SWIMMING POOLS, MASONRY FENCES, AND MASONRY CHIMNEYS.
THIS DISCLOSURE FORM CONTAINS ONLY A GENERAL DESCRIPTION OF COVERAGES
AND IS NOT PART OF YOUR EARTHQUAKE INSURANCE POLICY. ONLY THE
SPECIFIC PROVISIONS OF YOUR POLICY WILL DETERMINE WHETHER A
PARTICULAR LOSS IS COVERED AND, IF SO, THE AMOUNT PAYABLE.
THE COVERAGE, SUBJECT TO POLICY PROVISIONS, MAY BE PURCHASED AT
ADDITIONAL COST ON THE FOLLOWING TERMS:
(A) AMOUNT OF DWELLING COVERAGE: ____
(B) APPLICABLE DEDUCTIBLE: ____ IF YOUR LOSS IS BELOW THIS AMOUNT,
YOU MAY NOT RECEIVE ANY PAYMENT FROM YOUR COVERAGE.
YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO
HOW THE DEDUCTIBLE APPLIES TO THE MARKET VALUE OF YOUR COVERAGE, THE
INSURED VALUE OF YOUR COVERAGE, OR THE REPLACEMENT VALUE OF YOUR
COVERAGE.
(C) CONTENTS COVERAGE: ____
IF YOUR LOSS DOES NOT EXCEED THE DEDUCTIBLE FOR THE DWELLING, YOU
WILL NOT RECEIVE ANY PAYMENT FOR THIS COVERAGE.
YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO
HOW THE DEDUCTIBLE APPLIES TO THE AMOUNT YOU RECEIVE PURSUANT TO THIS
COVERAGE.
(D) ADDITIONAL LIVING EXPENSES: ____
(E) RATE OR PREMIUM: ____
YOU MUST ASK THE COMPANY TO ADD EARTHQUAKE COVERAGE WITHIN 30 DAYS
FROM THE DATE OF MAILING OF THIS NOTICE OR IT SHALL BE CONCLUSIVELY
PRESUMED THAT YOU HAVE NOT ACCEPTED THIS OFFER.
THIS COVERAGE SHALL BE EFFECTIVE ON THE DAY YOUR ACCEPTANCE OF
THIS OFFER IS RECEIVED BY US.
(b) When the insurer, agent, or broker establishes delivery of the
disclosure form by obtaining the signature of the applicant or
insured, or when an insurer, agent, or broker provides the applicant
with the disclosure form and the applicant does not return a signed
acknowledgment of receipt within 60 days of the date it was provided,
there shall be a conclusive presumption that the insurer, agent, or
broker has complied with the disclosure requirements of this section.
(c) The offer may contain additional provisions not in conflict
with or in derogation of this section.
(d) The commissioner may only approve modifications to the
language prescribed in subdivision (a) if all of the following
conditions are met:
(1) The modifications are not in conflict with or in derogation of
any provision of this section or Section 10089.
(2) The modifications are necessary to ensure that the disclosure
statement accurately reflects the coverage actually provided by the
policy being offered.
(3) The modifications are strictly limited to necessary changes so
that the modified disclosure statement is otherwise identical to the
disclosure statement prescribed in this section.
(e) Use of the language prescribed by this section, or modified
language approved pursuant to subdivision (d), shall constitute
compliance with the requirements of Section 10081 by an insurer
subject thereto.
(f) (1) If the insurer offers policies providing
earthquake coverage, other than the coverage an
insurer issues a policy with earthquake coverage that does not meet
the minimum coverage requirements 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 one of those policies has been
accepted, no further or other offer of earthquake coverage
meeting the minimum coverage requirements is required at a
renewal if the insurer has offered a renewal of that policy and has
provided written notice with that renewal regarding additional
earthquake coverage that is available. and no further
or other notice of noncoverage is required by the insurer
if both of the following apply:
(A) A renewal of that policy is offered.
(B) A written notice is provided with that renewal regarding
additional earthquake coverage that is available.
(2) The form of the written notice in paragraph (1) shall be filed
with the commissioner at least 30 days before its first use. The
form shall not be used if the commissioner disapproves the form of
the written notice within that period for being misleading or
incomplete.
(g) 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 10083 of the Insurance Code, as added by Section
13 of Chapter 369 of the Statutes of 2013, is amended to read:
10083. (a) The offer of coverage required by Section 10081 may be
made prior to, concurrent with, or within 60 days following the
issuance or renewal of a residential property insurance policy. If
the offer of coverage is mailed to the named insured or applicant, it
shall be mailed to the mailing address shown on the policy of
residential property insurance or on the application. The offer of
earthquake coverage shall contain the following language in at least
10-point boldface type:
YOUR POLICY DOES NOT PROVIDE COVERAGE AGAINST THE PERIL OF
EARTHQUAKE.
CALIFORNIA LAW REQUIRES THAT EARTHQUAKE COVERAGE BE OFFERED TO YOU
AT YOUR OPTION.
WARNING: THESE COVERAGES MAY DIFFER SUBSTANTIALLY FROM AND PROVIDE
LESS PROTECTION THAN THE COVERAGE PROVIDED BY YOUR HOMEOWNERS'
INSURANCE POLICY. THERE ARE EXCLUSIONS AND LIMITATIONS SUCH AS
OUTBUILDINGS, SWIMMING POOLS, MASONRY FENCES, AND MASONRY CHIMNEYS.
THIS DISCLOSURE FORM CONTAINS ONLY A GENERAL DESCRIPTION OF COVERAGES
AND IS NOT PART OF YOUR EARTHQUAKE INSURANCE POLICY. ONLY THE
SPECIFIC PROVISIONS OF YOUR POLICY WILL DETERMINE WHETHER A
PARTICULAR LOSS IS COVERED AND, IF SO, THE AMOUNT PAYABLE.
THE COVERAGE, SUBJECT TO POLICY PROVISIONS, MAY BE PURCHASED AT
ADDITIONAL COST ON THE FOLLOWING TERMS:
(A) AMOUNT OF DWELLING COVERAGE: ____
(B) APPLICABLE DEDUCTIBLE: ____ IF YOUR LOSS IS BELOW THIS AMOUNT,
YOU MAY NOT RECEIVE ANY PAYMENT FROM YOUR COVERAGE.
YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO
HOW THE DEDUCTIBLE APPLIES TO THE MARKET VALUE OF YOUR COVERAGE, THE
INSURED VALUE OF YOUR COVERAGE, OR THE REPLACEMENT VALUE OF YOUR
COVERAGE.
(C) CONTENTS COVERAGE: ____
IF YOUR LOSS DOES NOT EXCEED THE DEDUCTIBLE FOR THE DWELLING, YOU
WILL NOT RECEIVE ANY PAYMENT FOR THIS COVERAGE.
YOUR INSURANCE COMPANY OR AGENT WILL PROVIDE WRITTEN NOTICE AS TO
HOW THE DEDUCTIBLE APPLIES TO THE AMOUNT YOU RECEIVE PURSUANT TO THIS
COVERAGE.
(D) ADDITIONAL LIVING EXPENSES: ____
(E) RATE OR PREMIUM: ____
YOU MUST ASK THE COMPANY TO ADD EARTHQUAKE COVERAGE WITHIN 30 DAYS
FROM THE DATE OF MAILING OF THIS NOTICE OR IT SHALL BE CONCLUSIVELY
PRESUMED THAT YOU HAVE NOT ACCEPTED THIS OFFER.
THIS COVERAGE SHALL BE EFFECTIVE ON THE DAY YOUR ACCEPTANCE OF
THIS OFFER IS RECEIVED BY US.
(b) When the insurer, agent, or broker establishes delivery of the
disclosure form by obtaining the signature of the applicant or
insured, or when an insurer, agent, or broker provides the applicant
with the disclosure form and the applicant does not return a signed
acknowledgment of receipt within 60 days of the date it was provided,
there shall be a conclusive presumption that the insurer, agent, or
broker has complied with the disclosure requirements of this section.
(c) The offer may contain additional provisions not in conflict
with or in derogation of this section.
(d) The commissioner may only approve modifications to the
language prescribed in subdivision (a) if all of the following
conditions are met:
(1) The modifications are not in conflict with or in derogation of
any provision of this section or Section 10089.
(2) The modifications are necessary to ensure that the disclosure
statement accurately reflects the coverage actually provided by the
policy being offered.
(3) The modifications are strictly limited to necessary changes so
that the modified disclosure statement is otherwise identical to the
disclosure statement prescribed in this section.
(e) Use of the language prescribed by this section, or modified
language approved pursuant to subdivision (d), shall constitute
compliance with the requirements of Section 10081 by an insurer
subject thereto.
(f) (1) If the insurer offers policies providing
earthquake coverage, other than the coverage an
insurer issues a policy with earthquake coverage that does
not meet the minimum coverage requirements 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 one of
those policies has been accepted, no further or other offer
of earthquake coverage meeting the minimum coverage requirements
is required at a renewal if the insurer has offered a
renewal of that policy and has provided written notice with that
renewal regarding additional earthquake coverage that is available.
and no further or other notice of noncoverage is
required by the insurer if both of the following apply:
(A) A renewal of that policy is offered.
(B) A written notice is provided with that renewal regarding
additional earthquake coverage that is available.
(2) The form of the written notice in paragraph (1) shall be filed
with the commissioner at least 30 days before its first use. The
form shall not be used if the commissioner disapproves the form of
the written notice within that period for being misleading or
incomplete.
(g) This section shall become operative on January 1, 2019.
SEC. 3. Section 10086.1 of the Insurance Code is amended to read:
10086.1. (a) Where the offer of earthquake coverage has not been
accepted, the insurer shall notify the named insured that the policy
does not provide that coverage. After the offer on an every other
year basis, the notice of noncoverage shall be provided prior to or
concurrent with the renewal of the policy of residential property
insurance. This section shall not affect any other provisions of this
chapter nor shall it affect coverage under the policy of residential
property insurance.
(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 one of those policies has been accepted, no further or
other offer of earthquake coverage meeting the minimum coverage
requirements is required at a renewal if the insurer has offered a
renewal of that policy and has provided written notice with that
renewal regarding additional earthquake coverage that is available.
(2) The form of the written notice in paragraph (1) shall be filed
with the commissioner at least 30 days before its first use. The
form shall not be used if the commissioner disapproves the form of
the written notice within that period for being misleading or
incomplete.
(b) No further or other notice of noncoverage is required pursuant
to subdivision (a) for policies subject to subdivision (f) of
Section 10083, and the insurer has complied with the conditions of
subdivision (f) of Section 10083.