BILL ANALYSIS
AB 2022
Page 1
ASSEMBLY THIRD READING
AB 2022 (Gaines)
As Amended May 11, 2010
Majority vote.
INSURANCE 12-0
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|Ayes:|Solorio, Blakeslee, | | |
| |Anderson, Caballero, | | |
| |Charles Calderon, Carter, | | |
| |Feuer, Hagman, Hayashi, | | |
| |Niello, Salas, Torres | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Revises the disclosure notice and the set of rights
that residential property insurers must provide to
policyholders. Specifically, this bill :
1)Requires the Residential Insurance Disclosure Notice
(disclosure notice) to identify the coverage purchased by the
customer from among the following primary forms of residential
dwelling insurance coverage, and defines the terms:
a) Actual cash value coverage;
b) Replacement cost coverage;
c) Extended replacement cost coverage;
d) Guaranteed replacement cost coverage; and,
e) Building code upgrade coverage.
2)Requires the disclosure notice to contain a category titled
"Information You Should Know About Residential Dwelling
Insurance" and explains thee terms:
a) Avoid being underinsured;
b) The residential dwelling coverage limit;
c) Demand surge;
d) Changes to property;
e) Exclusions;
f) Contents (personal property) coverage disclosure; and,
g) Consumer assistance.
3)Requires the California Residential Property Insurance Bill of
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Rights to be plainly prepared, restates seven rights
currently provided to residential property insurance
policyholders, strengthens the disclosure of one existing
right (i.e., requires the explanation for a policy
cancellation or nonrenewal to be in writing), and adds the
right to an offer of coverage and premium quote for earthquake
coverage.
4)Provides that its provisions will become operative on July 1,
2011.
EXISTING LAW :
1)Requires insurers that sell residential property insurance to
disclose to buyers the principal forms of insurance coverage
for residential dwellings, and the form of dwelling coverage
that the buyer has purchased. This notice is named the
California Residential Property Insurance Disclosure Statement
(disclosure statement).
2)Specifies that the disclosure statement shall contain the
following forms of dwelling coverages and defines the terms:
a) Guaranteed replacement cost coverage with full building
code upgrade;
b) Guaranteed replacement cost coverage with limited or no
building code upgrade;
c) Limited replacement cost coverage with an additional
percentage;
d) Limited replacement cost coverage with no additional
percentage;
e) Actual cash value coverage; and,
f) Building code upgrade.
3)Specifies that the disclosure statement does not explain the
types of contents coverage (furniture, clothing, etc.)
provided by the residential policy.
4)Requires the disclosure statement to be accompanied by a
California Residential Property Insurance Bill of Rights
(property bill of rights) that is printed in at least 10-point
type.
5)Requires this property bill of rights to contain both items of
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advice (such as "keep accurate records of renovations and
improvements to the structure of your home") and information
that the consumer is entitled to receive (including a copy of
the residential policy and an explanation of how the policy
limits were established).
FISCAL EFFECT : No new cost is expected.
COMMENTS :
1)The purpose of this bill is to revise the disclosure notice
required to be provided to homeowners by insurers so it is
shorter, easier to read, and to make it possible for the
homeowner to review the adequacy of his or her coverage in the
event of a loss or a major catastrophe.
2)The California Residential Property Insurance Disclosure
legislation, which was adopted in 1992, was the response to
the insurance claims issues arising from the Oakland Hills
Fire of 1991. There were approximately 3,000 houses and
apartments that were completely destroyed by that fire and
many of the homeowners were significantly underinsured.
According to the author, the main purpose of this disclosure
legislation was to alert policyholders to the various forms of
coverage available so they would know the importance of
seeking Guaranteed Replacement Coverage and to become aware of
the their current coverages and options.
3)Since the enactment of the disclosure legislation in 1992,
California has had the misfortune to suffer several major
disasters. The bill's proponents state that the disclosure
notice has become outdated in its content. Due to the length
of the disclosure notice and the technical descriptions of
coverage and responsibilities, the disclosure notice fails to
provide the readability necessary to effectively convey the
important information.
The revised disclosure notice is easier to read, updates key
terms in homeowners policies, emphasizes the avoidance of
underinsurance, and describes the effect of a demand surge on
construction costs. This information will help homeowners in
reviewing the adequacy of their insurance coverages in the
event of a catastrophe such as a wildfire.
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Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086
FN: 0004292