BILL ANALYSIS                                                                                                                                                                                                    






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          |SENATE RULES COMMITTEE            |                        SB 335|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
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                                       CONSENT


          Bill No:  SB 335
          Author:   Roth (D)
          Introduced:2/23/15  
          Vote:     21  

           SENATE INSURANCE COMMITTEE:  7-0, 4/22/15
           AYES:  Roth, Gaines, Berryhill, Hernandez, Liu, Mitchell,  
            Wieckowski
           NO VOTE RECORDED:  Hall

           SUBJECT:   Earthquake insurance


          SOURCE:    Author


          DIGEST:  This bill 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.


          ANALYSIS:    


          Existing law:


           1)  Generally provides for the regulation of residential  
              earthquake insurance.









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           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.


           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.


           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 earthquake insurance 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.









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                                                                    Page  3


          Background


          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.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:   (Verified4/22/15)


          California Association of Realtors


          OPPOSITION:   (Verified4/22/15)


          None received


          ARGUMENTS IN 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  







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                                                                    Page  4


          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.


          Prepared by:Erin Ryan / INS. / (916) 651-4110
          4/24/15 15:45:03


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