BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 499|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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CONSENT
Bill No: AB 499
Author: Cooley (D)
Amended: 6/9/16 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE: 8-0, 6/22/16
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez,
Mitchell, Wieckowski
NO VOTE RECORDED: Liu
ASSEMBLY FLOOR: Not relevant
SUBJECT: Insurance: earthquake: mandatory offer
SOURCE: Author
DIGEST: This bill 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.
ANALYSIS:
AB 499
Page 2
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;
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;
AB 499
Page 3
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 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;
AB 499
Page 4
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 allow for electronic transmission of insurance
documents.
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.
AB 499
Page 5
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, Chapter
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 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 (Dababneh, 2016) that would change the electronic
transmission statute cited in these sections.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified6/27/16)
Association of California Insurance Companies
CSAA Insurance Group
National Association of Mutual Insurance Companies
Pacific Association of Domestic Insurance Companies
AB 499
Page 6
OPPOSITION: (Verified6/27/16)
None received
ARGUMENTS IN 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.
Prepared by:Erin Ryan / INS. / (916) 651-4110
6/29/16 15:45:38
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