BILL ANALYSIS Ó
SENATE COMMITTEE ON INSURANCE
Senator Richard Roth, Chair
2015 - 2016 Regular
Bill No: AB 499 Hearing Date: June 22,
2016
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|Author: |Cooley |
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|Version: |June 9, 2016 |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Erin Ryan |
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Subject: Insurance: earthquake: mandatory offer
SUMMARY Eliminates the presumption of delivery of the mandatory offer
of earthquake insurance disclosure form if the applicant for
homeowners' insurance does not return a signed acknowledgement
of receipt within 60 days of the date it was provided; revises
the requirement for a stand-alone notice of changes in the terms
and conditions of an earthquake insurance policy at renewal to
only require the stand-alone notice if the modifications reduce
or substantially differ from the coverage previously provided;
establishes a consistent proof of mailing or delivery
presumption for any offer, disclosure, or document required to
be delivered under statutes governing the mandatory offer or
renewal of earthquake insurance; and makes other technical and
clarifying changes.
DIGEST
Existing law
1. Provides that no homeowners' insurance policy may be offered or
sold in California unless the homeowner is offered earthquake
coverage, either as part of the homeowners' policy, or as a
separate policy;
2. Requires all earthquake insurance policies to meet specified
minimum coverages, as defined;
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3. Requires the offer of earthquake insurance to be made prior to,
concurrent with, or within 60 following the issuance or renewal
of a homeowners' insurance policy;
4. Establishes a conclusive presumption that the insurer, agent or
broker complied with the offer disclosure requirement if it
delivers the offer and the homeowner does not return the signed
acknowledgement of receipt within 60 days of the date it was
provided;
5. Establishes a conclusive presumption that the insured elected
not to accept the coverage if the insurer establishes proof of
mailing or delivery of the offer and the insured has not
accepted coverage within 30 days from date of mailing or
delivery;
6. When a homeowner has not purchased earthquake coverage pursuant
to the mandated offer, requires the insurer to notify the
homeowner that the homeowners' policy does not include
earthquake coverage, offer such coverage and provide such a
notice of non-coverage on at least an every other year basis
prior to or concurrent with renewal of the homeowners' insurance
policy;
7. Provides that if an offer of earthquake coverage is accepted,
the coverage will be continued at the applicable rates and
conditions for the policy term provided it is not terminated by
the insured or insurer;
8. Allows the insurer to modify the terms and conditions of an
existing policy at renewal if the terms and conditions meet the
minimum coverages required by law if the insurer provides the
insured the changes in the terms and conditions of the policy in
a stand-alone disclosure document;
9. Provides that proof of mailing or delivery of the disclosure in
#8 establishes a conclusive presumption that the disclosure
document was provided.
This bill
1. Eliminates the presumption of delivery of the offer
disclosure form if the applicant for homeowners' insurance
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does not return a signed acknowledgement of receipt within
60 days of the date it was provided;
2. Provides that if an offer of earthquake insurance is not
accepted, the insurer must offer earthquake insurance on an
every other year basis in connection with any continuation,
renewal, or reinstatement of the homeowners' insurance
policy following any lapse, or with respect to any other
policy that extends, changes, superseded, or replaces the
residential property insurance policy;
3. Revises the requirement for a stand-alone notice of changes
in the terms and conditions of an earthquake insurance
policy at renewal to only require the stand-alone notice if
the modifications reduce or substantially differ from the
coverage previously provided;
4. Establishes a consistent proof of mailing or delivery
presumption for any offer, disclosure, or document required
to be delivered under statutes governing the mandatory offer
of earthquake insurance;
5. Provides that if an offer, disclosure, or document required
to be delivered is mailed by first class mail or is pursuant
to rules governing the electronic delivery of insurance
documents, there is a conclusive presumption the offer was
made or document was delivered as required;
6. Provides that if a document is hand delivered to the
insured, the insured's signed receipt creates a conclusive
presumption;
7. Makes other technical and clarifying changes and adds
contingent enactment language to address pending legislation
that would change or renumber the provisions of Insurance
Code §38.5 that allows for electronic transmission of
insurance documents.
COMMENTS
1. Purpose of the bill To clarify the sometimes conflicting
presumptions regarding proof of delivery of various offers,
notices and disclosures relating to the mandatory offer of
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earthquake insurance at the time of application for a
homeowners' insurance policy, renewal of the homeowners'
insurance policy or renewal of an earthquake insurance
policy without changing the underlying mechanics or consumer
protections.
2. Background California requires all insurers offering
homeowners' insurance in this state to also offer earthquake
insurance. After the Northridge earthquake in 1994, the
costliest natural disaster in the history of the state with
more than $25 billion in property damage, many insurers
simply stopped writing homeowners' insurance rather than
offer earthquake coverage. As a result, the legislature
created a "mini policy" that could be sold by any insurer to
comply with the mandatory offer law: only earthquake loss
due to structural damage need be covered, with a 15%
deductible. Claims on personal property losses and "loss of
use" are limited. It also created the California Earthquake
Authority, which is regulated like a private insurance
company by the California department of Insurance (CDI) even
though it is a quasi-state agency.
In order to comply with the mandatory offer law, there are
specific notices and disclosures regarding earthquake
insurance that must be provided at the time a homeowner
applies for homeowners' insurance, when they renew their
insurance, or if an insurer changes the terms or conditions
of an earthquake insurance policy at the time of renewal of
that policy.
This bill was brought forward because after extensive review
of these statutes by insurers and the CDI, it was determined
that the use of the terms notice and disclosure was
inconsistent, as were the provisions for establishing
conclusive proof of delivery or receipt by the consumer as
required by law. This bill is the result of that review and
agreement between the CDI and insurers as reflecting a
"clean-up" of the statute.
These sections of law were amended by SB 251 (Calderon,
Chap. 369, Statutes of 2013) to allow for the electronic
delivery of documents, as provided by law. The bill also
included a sunset date of January 1, 2019 for the changes it
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made to the statute. This bill does not change the sunset
date included in SB 251, but does provide alternate sections
contingent on the enactment of AB 2591 that would change the
electronic transmission statute cited in these sections.
3. Support The National Association of Mutual Insurance
Companies and the Pacific Association of Domestic Insurance
Companies support AB 499 because it is a common-sense
"clean-up" bill that will resolve some ambiguity and
inconsistency in the conclusive presumptions regarding
delivery of consumer disclosures required in the mandatory
offer, offer upon renewal of the homeowners' policy if the
homeowner has not purchased earthquake insurance, and
changes in terms of earthquake policies at time of renewal.
4. Opposition None received
5. Prior and Related Legislation
AB 2591 (Dababneh) Consolidates and recasts the several
standards applicable to electronic transactions applicable
to insurance notices, in addition to those provided under
the Uniform Electronic Transactions Act, and applies those
standards and to additional insurance documents.
AB 2064 (Cooley, Chap. 419, Statutes of 2014) Revised and
recast statutory notice requirements relating to the
mandatory offer of earthquake insurance.
AB 2735 (Assembly Insurance Committee, Chap. 427, Statutes
of 2014) Provided that if an insurer issues or causes to be
issued a policy with earthquake coverages other than the
specified coverages, but in accordance with an approved rate
application, no further or other offer of earthquake
coverage meeting the coverage and deductible 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.
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POSITIONS
Support
Association of California Insurance Companies
CSAA Insurance Group
National Association of Mutual Insurance Companies
Pacific Association of Domestic Insurance Companies
Oppose
None received
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