BILL ANALYSIS Ó
AB 1440
Page 1
ASSEMBLY THIRD READING
AB
1440 (Nazarian)
As Amended April 20, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
|----------------+------+---------------------+---------------------|
|Insurance |12-0 |Daly, Beth Gaines, | |
| | |Calderon, Cooley, | |
| | |Cooper, Dababneh, | |
| | |Frazier, Gatto, | |
| | |Gonzalez, Grove, | |
| | |Mayes, Rodriguez | |
| | | | |
|----------------+------+---------------------+---------------------|
|Appropriations |17-0 |Gomez, Bigelow, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Gallagher, | |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Gordon, Holden, | |
| | |Jones, Quirk, | |
| | |Rendon, Wagner, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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AB 1440
Page 2
SUMMARY: Establishes the statutory structure for seismic retrofit
grant program for individual homeowners. Specifically, this bill:
1)Requires the California Earthquake Authority (CEA) to form a
joint powers authority (JPA) with the Office of Emergency
Services (OES) to develop a seismic retrofit grant program for
individual homeowners.
2)Limits grant funding from this program to individual homeowners
and grant amounts to 75% of retrofit costs or $3,000.
3)Requires the JPA to adopt regulations defining the type and
location of homes eligible for grant funding.
4)Requires the JPA to adopt regulations to establish the criteria
for determining grant amounts.
5)Makes findings and declarations regarding earthquake mitigation
efforts and the need for residential seismic retrofit programs.
EXISTING LAW:
1)Establishes the CEA as a publicly managed insurer to provide
residential earthquake insurance.
2)Defines residential earthquake insurance as a policy protecting
a residence with four or fewer dwelling units.
3)Requires OES to perform a variety of duties with respect to
specified emergency preparedness, mitigation, and response
AB 1440
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activities in the state, including emergency medical services.
4)Establishes the Earthquake Loss Mitigation Fund (mitigation
fund) as a sub-account with the CEA Fund and directs the fund to
transfer 5% of its investment earnings into the fund each year.
This fund is available to pay for research and mitigation
programs undertaken by the CEA.
5)Allows public agencies to form JPAs for the exercise of shared
powers.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)The creation of the program in statute, by itself, does not have
state costs, as the program would only be operational if the
Legislature appropriates funds. The California Earthquake
Authority (CEA) is privately funded and the current grant
program is funded by a portion of CEA investment income.
2)However, creation of the program in statute, coupled with
legislative findings, imply the availability of state funding
for the program.
COMMENTS:
1)Purpose. According to the author, only 12% California
homeowners have earthquake insurance, but there are between 1.2
million to 1.6 million pre-1940s homes with so called "cripple
walls," and homes on hillsides, and those with living space over
garages that are at serious risk in even a minor quake, let
alone a major one. California has an existing seismic
mitigation incentive program called Earthquake Brace + Bolt
(EBB), which is administered by the California Residential
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Mitigation Program, but is limited to only 650 homes in the Bay
Area, LA County and Napa. The goal of this legislation is to
expand on Brace + Bolt and create a statewide earthquake
retrofit program to cover tens of thousands of more homes.
2)Brace + Bolt. The EBB program was created by the California
Residential Mitigation Program, which is a joint power authority
between the California Earthquake Authority and the Governor's
Office of Emergency Services. The EBB was developed to help
homeowners lessen the potential for damage to their houses
during an earthquake. A residential seismic retrofit
strengthens an existing house, making it more resistant to
earthquake activity such as ground shaking and soil failure, by
bolting the house to its foundation and adding bracing around
the perimeter of the crawl space. The EBB program provides
homeowners up to $3,000 to strengthen their foundation and
lessen the potential for earthquake damage. A typical retrofit
may cost between $2,000 and $10,000 depending upon the location,
the size of the house, and the amount of work involved.
3)California Earthquake Authority. The CEA was formed through
legislation in 1995 and 1996 to address an
insurance-availability crisis that followed the 1994 Northridge
earthquake. After that earthquake, many homeowners found it
difficult or impossible to find basic homeowner's insurance.
Many others were faced with the prospect of having their
homeowners' insurance non-renewed as insurance companies tried
to shed their exposure to earthquake risk. Because state law
requires insurers to offer earthquake insurance to their
applicants and holders of residential policies, the insurers'
retreat from the California market resulted in an availability
crisis for both homeowners and earthquake insurance. The
Department of Insurance reported in the summer of 1996, at the
height of the crisis, that 95% of the homeowners' insurance
market had either stopped, or severely restricted, sales of new
homeowners' policies. After the CEA began operations in
December 1996, the California homeowners' insurance market
recovered quickly. A Department of Insurance report noted that
at the peak of the availability crisis, 82 insurers had
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restricted the sale of new homeowners' insurance policies. By
October 1997, only three insurers were restricting the sale of
new policies. Since that time, the requirement to offer
earthquake insurance has not been a factor in restricting the
availability of homeowners' insurance.
Analysis Prepared by:
Paul Riches / INS. / (916) 319-2086 FN: 0000954