BILL ANALYSIS Ó
SENATE COMMITTEE ON INSURANCE
Senator Richard Roth, Chair
2015 - 2016 Regular
Bill No: SB 335 Hearing Date: April 22,
2015
-----------------------------------------------------------------
|Author: |Roth |
|-----------+-----------------------------------------------------|
|Version: |February 23, 2015 |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Urgency: |No |Fiscal: |No |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Consultant:|Erin Ryan |
| | |
-----------------------------------------------------------------
Subject: Earthquake insurance
SUMMARY Requires additional earthquake insurance premium paid as a
result of failure to comply with specified building code
standards to be refunded to an insured that subsequently brings
the dwelling up to code, pro-rated as of the date the approved
inspection record is received by the insurer, and makes other
technical and clarifying changes.
DIGEST
Existing law
1. Generally provides for the regulation of residential earthquake
insurance;
2. 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;
3. Allows insurers to charge an additional earthquake premium or
deductible if a dwelling fails to comply with specified uniform
building codes; (§10082.5)
4. Provides that if the dwelling is subsequently brought into
compliance with the applicable building code, then the
additional premium or deductible shall not be charged;
SB 335 (Roth) Page 2
of ?
5. Requires a copy of the approved inspection record for the work
performed to bring the dwelling into compliance be submitted by
the insured to the insurer to verify that the retrofits have
been performed;
6. Requires personal lines insurers, including but not limited to
homeowners' and automobile insurers, whenever a policy
terminates or there is a reduction in coverage, to refund the
gross unearned premium to the insured within 25 business days
after the insurer receives notice of the event that generated
the unearned premium.
This bill
1. Requires additional premium or deductible paid as a result
of failure to conform with building codes to be refunded to
an insured that brings the dwelling into compliance,
prorated as of the date the approved inspection record is
received by the insurer;
2. Makes other technical and clarifying changes.
COMMENTS
1. Purpose of the bill To ensure that homeowners who repair
or retrofit their homes to meet required building codes get
a refund of any surcharges for noncompliance they have
pre-paid once their home is brought into compliance.
2. Background Fewer than 11% of California homeowners
purchase earthquake insurance, despite predictions that the
state will experience a major earthquake sometime in the
next 30 years. The low frequency of earthquake disasters,
compared to other natural catastrophes, tends to shape the
perception that earthquake risk is much lower than it
actually is, even in places where there have been very
deadly and damaging events like California. In addition,
earthquake insurance policies can be expensive and carry
large deductibles, making them unattractive to homeowners
who are not mandated to carry such coverage by law or
SB 335 (Roth) Page 3
of ?
required to purchase it by their lenders.
Current law allows earthquake insurers to charge an
additional earthquake premium or deductible if a dwelling
fails to meet specified building standards. It also
specifies that if the dwelling is subsequently brought into
compliance, then the additional premium or deductible
attributed to non-compliance shall not be charged. A copy of
the approved inspection record must be submitted to the
insurer to verify that the retrofits have been performed.
(Insurance Code §10082.5). Current law requires personal
lines insurers, whenever a policy terminates, or there is a
reduction in coverage, to refund the gross unearned premium
to the insured within 25 business days after the insurer
receives notice of the event that generated the unearned
premium. (Insurance Code §481.5) This bill makes clear that
a homeowner is entitled to a refund of any premium surcharge
as of the date the reason for the surcharge is eliminated.
3. Support According to the author, individuals that make the
necessary improvements and upgrades to their homes to meet
building code standards to protect against earthquake damage
should not have to pay the higher premiums charged to those
who fail to comply with building code standards. Many
homeowners who purchase earthquake insurance pay their
premiums annually, or every six months, and they should be
entitled to a quick refund of any excess paid. The
California Association of Realtors supports SB 335 because
it offers an equitable result for homeowners who bring their
homes into compliance with recommended seismic
reinforcements, and provides an additional incentive to be
pro-active in addressing the seismic safety of their homes.
4. Prior and Related Legislation SB 602 (Monning) allows the
CEA to create a new voluntary financing tool for homeowners
to mitigate and retrofit their homes against earthquake
damage.
POSITIONS
Support
SB 335 (Roth) Page 4
of ?
California Association of Realtors
Oppose
None received
-- END --