BILL ANALYSIS
AB 1413
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Date of Hearing: May 6, 2009
ASSEMBLY COMMITTEE ON INSURANCE
Joe Coto, Chair
AB 1413 (Coto) - As Amended: April 16, 2009
And As Proposed To Be Amended
SUBJECT : Homeowners' insurance: extended replacement policies
SUMMARY : Provides that a policyholder is entitled to recover
the extended or guaranteed replacement amount from an insurer
after a total loss regardless of whether the homeowner rebuilds
the home on the same site. Specifically, this bill :
1)Provides that if a homeowners insurance policy has an extended
or guaranteed replacement cost coverage provision, the full
scope of this coverage is available whether the policyholder
rebuilds at the original location or a new location.
2)Specifies that, if the policyholder actually builds or
replaces at a new location, the maximum amount to which the
policyholder is entitled is determined by the replacement cost
of the damaged property for equivalent construction materials
of like kind and quality at the original location, up to the
limits stated in the policy.
EXISTING LAW :
1)Defines guaranteed replacement cost coverage as a coverage
that will cover the full amount needed to replace a destroyed
home regardless of the stated policy limits.
2)Defines extended replacement cost coverage as a coverage that
will cover more than the stated policy limits, up to a stated
percentage of the policy limits, if needed to replace a
destroyed home.
3)Specifies that if a policy has a replacement cost coverage,
the measure of indemnity is the amount it would cost the
insured to repair, rebuild or replace the thing lost or
injured, without allowance for depreciation.
FISCAL EFFECT : Undetermined.
COMMENTS :
AB 1413
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1)Purpose . The author introduced this bill to clarify existing
law by codifying the Department of Insurance interpretation of
the effect of a homeowner choosing to rebuild after a total
loss at a location other than the site of the destroyed home.
The homeowner should not have to accept a lesser home because
he or she chooses to build at another location.
2)Background . During the aftermath of several of the wildfires
that California has experienced in the past few years, many
homeowners have opted to relocate rather than to rebuild on
the same site that the firestorm destroyed. While many
insurers have not attempted to limit the scope of the
homeowner's recovery as a result of this choice, some insurers
have taken the position that the policy guarantees replacement
of the thing lost - that specific house - and that policy
limits may be available if the homeowner chooses to relocate,
but the extended or guaranteed amount above policy limits is
not.
The Department of Insurance has disagreed with this position,
and in April, 2008 issued an opinion that the homeowner is
entitled to receive up to the extended or guaranteed amount
even if the homeowner relocates to another site. This bill
codifies that opinion.
3)Prior version of bill . This analysis is of proposed
amendments that establish a new Insurance Code section
codifying the rule discussed above. The April 16, 2009
version proposed to adopt this rule as part of the Standard
Form Fire Insurance Policy that is the policy form insurers
are required to use. Insurers expressed concerns about
adopting the rule within the policy form, and instead
suggested that it be adopted in a separate substantive code
section. The amendments being offered by the author
accomplish that goal.
REGISTERED SUPPORT / OPPOSITION :
Support
None received.
Opposition
AB 1413
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None received.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086