AB 2064, as amended, Cooley. Earthquake insurance: mandatory offer.
Existing law prohibits a policy of residential property insurance from being issued or delivered or initially renewed in this state unless the named insured is offered coverage for loss or damage caused by an earthquake, as provided, and, if the offer of earthquake coverage is accepted, requires the insurer to provide certain disclosures based on whether the policy was issued by the California Earthquake Authority (CEA).
Existing law created the CEA, to be administered under the authority of the Insurance Commissioner, and authorized it to transact insurance in this state as necessary to sell policies of basic residential earthquake insurance in the manner provided. The CEA has no authority to transact any other type of insurance business. The CEA’s operating expenses are capped at 3% of its premium income.
This bill would revise and recast these provisions by revising the disclosure language an insurer is required to use in offering earthquakebegin delete coverage and makingend deletebegin insert coverage, makingend insert the contents of that disclosure language dependent upon whether the insurer is a member of the CEA orbegin delete not andend deletebegin insert not, andend insert by requiring insureds to be provided with specified disclosures with regard to coverage of losses, the CEA’s liability limitations, and premiums concurrent with the issuance or renewal by the CEA of a residential earthquake insurance policy. The bill would require a participating insurer, at least once
each year, to provide each of its residential property insureds with marketing documents produced at the CEA’s expense. The bill would make these provisions operative on January 1, 2016.
This bill would increase the cap on the CEA’s operating expenses to not more than 6% of its premium income, and exclude certain expenses and costs from being classified as operating expenses.
begin insertThis bill also would incorporate additional changes in Section 10083 of the Insurance Code, as amended by Section 12 of Chapter 369 of the Statutes of 2013, proposed by AB 2735, to be operative if AB 2735 and this bill are both enacted and become effective on or before January 1, 2015, and this bill is enacted last.
end insertbegin insertThis bill would incorporate into Section 10083 as proposed to be added to the Insurance Code changes proposed by AB 2735, to be operative if AB 2735 and this bill are both enacted and become effective on or before January 1, 2015.
end insertbegin insertThis bill also would incorporate additional changes in Section 10083 of the Insurance Code, as added by Section 13 of Chapter 369 of the Statutes of 2013, proposed by AB 2735, to be operative if AB 2735 and this bill are both enacted and become effective on or before January 1, 2015, and this bill is enacted last.
end insertVote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 10083 of the Insurance Code, as amended
2by Section 12 of Chapter 369 of the Statutes of 2013, is amended
3to read:
(a) The offer of coverage required by Section 10081
5may be made prior to, concurrent with, or within 60 days following
6the issuance or renewal of a residential property insurance policy.
P3 1If the offer of coverage is mailed to the named insured or applicant,
2it shall be mailed to the mailing address shown on the policy of
3residential property insurance or on the application. The offer may
4be made electronically pursuant to Section 38.5. The offer of
5earthquake coverage shall contain the following language in at
6least 10-point boldface type:
8 “YOUR POLICY DOES NOT PROVIDE COVERAGE
9AGAINST THE PERIL OF EARTHQUAKE.
10CALIFORNIA
LAW REQUIRES THAT EARTHQUAKE
11COVERAGE BE OFFERED TO YOU AT YOUR OPTION.
12WARNING: THESE COVERAGES MAY DIFFER
13SUBSTANTIALLY FROM AND PROVIDE LESS
14PROTECTION THAN THE COVERAGE PROVIDED BY YOUR
15HOMEOWNERS’ INSURANCE POLICY. THERE ARE
16EXCLUSIONS AND LIMITATIONS SUCH AS
17OUTBUILDINGS, SWIMMING POOLS, MASONRY FENCES,
18AND MASONRY CHIMNEYS. THIS DISCLOSURE FORM
19CONTAINS ONLY A GENERAL DESCRIPTION OF
20COVERAGES AND IS NOT PART OF YOUR EARTHQUAKE
21INSURANCE POLICY. ONLY THE SPECIFIC PROVISIONS
22OF YOUR POLICY WILL DETERMINE WHETHER A
23PARTICULAR LOSS IS COVERED AND, IF SO, THE
24AMOUNT PAYABLE.
25THE COVERAGE, SUBJECT TO POLICY PROVISIONS,
26MAY BE PURCHASED AT ADDITIONAL COST ON THE
27FOLLOWING TERMS:
28(A) AMOUNT OF DWELLING COVERAGE: ____
29(B) APPLICABLE DEDUCTIBLE: ____ IF YOUR LOSS IS
30BELOW THIS AMOUNT, YOU MAY NOT RECEIVE ANY
31PAYMENT FROM YOUR COVERAGE.
32YOUR INSURANCE COMPANY OR AGENT WILL
33PROVIDE WRITTEN NOTICE AS TO HOW THE
34DEDUCTIBLE APPLIES TO THE MARKET VALUE OF YOUR
35COVERAGE, THE INSURED VALUE OF YOUR COVERAGE,
36OR THE REPLACEMENT VALUE OF YOUR COVERAGE.
37(C) CONTENTS COVERAGE: ____
38IF YOUR LOSS DOES NOT EXCEED THE DEDUCTIBLE
39FOR THE DWELLING, YOU WILL NOT RECEIVE ANY
40PAYMENT FOR THIS COVERAGE.
P4 1YOUR INSURANCE COMPANY OR AGENT WILL
2PROVIDE WRITTEN NOTICE AS TO HOW THE
3DEDUCTIBLE APPLIES TO THE AMOUNT YOU RECEIVE
4PURSUANT TO THIS
COVERAGE.
5(D) ADDITIONAL LIVING EXPENSES: ____
6(E) RATE OR PREMIUM: ____
7YOU MUST ASK THE COMPANY TO ADD EARTHQUAKE
8COVERAGE WITHIN 30 DAYS FROM THE DATE OF
9MAILING OF THIS NOTICE OR IT SHALL BE
10CONCLUSIVELY PRESUMED THAT YOU HAVE NOT
11ACCEPTED THIS OFFER.
12THIS COVERAGE SHALL BE EFFECTIVE ON THE DAY
13YOUR ACCEPTANCE OF THIS OFFER IS RECEIVED BY
14
US.”
16(b) When the insurer, agent, or broker establishes delivery of
17the disclosure form by obtaining the signature of the applicant or
18insured, or when an insurer, agent, or broker provides the applicant
19with the disclosure form and the applicant does not return a signed
20acknowledgment of receipt within 60 days of the date it was
21provided, there shall be a conclusive presumption that the insurer,
22agent, or broker has complied with the disclosure requirements of
23this section.
24(c) The offer may contain additional provisions not in conflict
25with or in derogation of this section.
26(d) The commissioner may only approve modifications to the
27language prescribed in
subdivision (a) if all of the following
28conditions are met:
29(1) The modifications are not in conflict with or in derogation
30of any provision of this section or Section 10089.
31(2) The modifications are necessary to ensure that the disclosure
32statement accurately reflects the coverage actually provided by
33the policy being offered.
34(3) The modifications are strictly limited to necessary changes
35so that the modified disclosure statement is otherwise identical to
36the disclosure statement prescribed in this section.
37(e) Use of the language prescribed by this section, or modified
38language approved pursuant to subdivision (d), shall constitute
39compliance with the
requirements of Section 10081 by an insurer
40subject thereto.
P5 1(f) This section shall remain in effect only until January 1, 2016,
2and as of that date is repealed, unless a later enacted statute, that
3is enacted before January 1, 2016, deletes or extends that date.
begin insertSection 10083 of the end insertbegin insertInsurance Codeend insertbegin insert, as amended
5by Section 12 of Chapter 369 of the Statutes of 2013, is amended
6to read:end insert
(a) The offer of coverage required by Section 10081
8may be made prior to, concurrent with, or within 60 days following
9the issuance or renewal of a residential property insurance policy.
10If the offer of coverage is mailed to the named insured or applicant,
11it shall be mailed to the mailing address shown on the policy of
12residential property insurance or on the application. The offer may
13be made electronically pursuant to Section 38.5. The offer of
14earthquake coverage shall contain the following language in at
15least 10-point boldface type:
17 YOUR
end delete
18begin insert“YOURend insert
POLICY DOES NOT PROVIDE COVERAGE
19AGAINST THE PERIL OF EARTHQUAKE.
20CALIFORNIA LAW REQUIRES THAT EARTHQUAKE
21COVERAGE BE OFFERED TO YOU AT YOUR OPTION.
22WARNING: THESE COVERAGES MAY DIFFER
23SUBSTANTIALLY FROM AND PROVIDE LESS
24PROTECTION THAN THE COVERAGE PROVIDED BY YOUR
25HOMEOWNERS’ INSURANCE POLICY. THERE ARE
26EXCLUSIONS AND LIMITATIONS SUCH AS
27OUTBUILDINGS, SWIMMING POOLS, MASONRY FENCES,
28AND MASONRY CHIMNEYS. THIS DISCLOSURE FORM
29CONTAINS ONLY A GENERAL DESCRIPTION OF
30COVERAGES AND IS NOT PART OF YOUR EARTHQUAKE
31INSURANCE POLICY. ONLY THE SPECIFIC PROVISIONS
32OF YOUR POLICY WILL DETERMINE WHETHER A
33PARTICULAR LOSS IS COVERED AND, IF SO, THE
34AMOUNT PAYABLE.
35THE COVERAGE, SUBJECT TO POLICY PROVISIONS,
36MAY BE PURCHASED AT ADDITIONAL COST ON THE
37FOLLOWING TERMS:
38(A) AMOUNT OF DWELLING COVERAGE: ____
P6 1(B) APPLICABLE DEDUCTIBLE: ____ IF YOUR LOSS IS
2BELOW THIS AMOUNT, YOU MAY NOT RECEIVE ANY
3PAYMENT FROM YOUR COVERAGE.
4YOUR INSURANCE COMPANY OR AGENT WILL
5PROVIDE WRITTEN NOTICE AS TO HOW THE
6DEDUCTIBLE APPLIES TO THE MARKET VALUE OF YOUR
7COVERAGE, THE INSURED VALUE OF YOUR COVERAGE,
8OR THE REPLACEMENT VALUE OF YOUR COVERAGE.
9(C) CONTENTS COVERAGE: ____
10IF YOUR LOSS DOES NOT EXCEED THE DEDUCTIBLE
11FOR THE DWELLING, YOU WILL NOT RECEIVE ANY
12PAYMENT FOR THIS COVERAGE.
13YOUR INSURANCE COMPANY OR AGENT WILL
14PROVIDE WRITTEN NOTICE AS TO HOW THE
15DEDUCTIBLE APPLIES TO THE AMOUNT YOU RECEIVE
16PURSUANT TO THIS COVERAGE.
17(D) ADDITIONAL LIVING EXPENSES: ____
18(E) RATE OR PREMIUM: ____
19YOU MUST ASK THE COMPANY TO ADD EARTHQUAKE
20COVERAGE WITHIN 30 DAYS FROM THE DATE OF
21MAILING OF THIS NOTICE OR IT SHALL BE
22CONCLUSIVELY PRESUMED THAT YOU HAVE NOT
23ACCEPTED THIS OFFER.
24THIS COVERAGE SHALL BE EFFECTIVE ON THE DAY
25YOUR ACCEPTANCE OF THIS OFFER IS RECEIVED BYbegin delete US.end delete
26begin insert US.”end insert
28(b) When the insurer, agent, or broker establishes delivery of
29the disclosure form by obtaining the signature of the applicant or
30insured, or when an insurer, agent, or broker provides the applicant
31with the disclosure form and the applicant does not return a signed
32
acknowledgment of receipt within 60 days of the date it was
33provided, there shall be a conclusive presumption that the insurer,
34agent, or broker has complied with the disclosure requirements of
35this section.
36(c) The offer may contain additional provisions not in conflict
37with or in derogation of this section.
38(d) The commissioner may only approve modifications to the
39language prescribed in subdivision (a) if all of the following
40conditions are met:
P7 1(1) The modifications are not in conflict with or in derogation
2of any provision of this section or Section 10089.
3(2) The modifications are necessary to ensure that the disclosure
4statement accurately reflects the coverage actually provided by
5the policy being offered.
6(3) The modifications are strictly limited to necessary changes
7so that the modified disclosure statement is otherwise identical to
8the disclosure statement prescribed in this section.
9(e) Use of the language prescribed by this section, or modified
10language approved pursuant to subdivision (d), shall constitute
11compliance with the requirements of Section 10081 by an insurer
12subject thereto.
13(f) (1) If an insurer issues or causes to be issued a policy with
14earthquake coverages other than the coverages specified in
15subdivisions (a) and (b) of Section 10089, pursuant to a rate
16application approved by the commissioner in accordance with
17subdivision (c) of Section 10089, no further or other offer of
18earthquake coverage as
specified in subdivisions (a) and (b) of
19Section 10089 and no further or other notice of noncoverage is
20required by the insurer if both of the following apply:
21(A) A renewal of that policy is offered.
end insertbegin insert
22(B) A written notice is provided with that renewal regarding
23additional earthquake coverage that is available.
24(2) The form of the written notice in paragraph (1) shall be filed
25with the commissioner at least 30 days before its first use. The
26form shall not be used if the commissioner disapproves the form
27of the written notice within that period for being misleading or
28incomplete.
29(f)
end delete
30begin insert(g)end insert This section shall remain in effect only until January 1,begin delete 2019,end delete
31begin insert 2016,end insert and as of that date is repealed, unless a later enacted statute,
32that is enacted before January 1,begin delete 2019,end deletebegin insert 2016,end insert deletes or extends
33that date.
Section 10083 is added to the Insurance Code, to read:
(a) The offer of coverage required by Section 10081
36may be made prior to, concurrent with, or within 60 days following
37the issuance or renewal of a residential property insurance policy.
38If the offer of coverage is mailed to the named insured or applicant,
39it shall be mailed to the mailing address shown on the policy of
P8 1residential property insurance or on the application. The offer may
2be made electronically pursuant to Section 38.5.
3(1) If the offer is made by a nonparticipating insurer as defined
4in Section 10089.5, the offer of earthquake coverage shall contain
5all of the following language in at least 10-point boldface type:
7“Your residential property insurance policy does not cover
8earthquake damage to your home or its contents.
9To cover earthquake damage to your home and its contents you
10need to purchase a separate earthquake insurance policy. The
11coverage provided by an earthquake insurance policy is different
12from, and typically more limited than, the coverage provided by
13your
residential property insurance policy.
14 California law requires insurance companies to offer earthquake
15insurance in conjunction with a residential property insurance
16policy. If you do not accept the offer of earthquake insurance below
17within 30 days of the mailing of this notice, your insurance
18company shall presume that you have not accepted this offer of
19earthquake insurance.
20You may purchase earthquake insurance coverage on the
21following terms:
22(A) Amount of Dwelling/Building Coverage Limit:
23______________
24(B) Deductible: ______________
25(C) Contents Coverage Limit: ________________
26(D) Additional Living Expenses Coverage Limit:
27_________________
28(E) Estimated Annual Premium:_______________
29The deductible represents the amount of damage your covered
30property must incur before the earthquake insurance coverage
31begins. If your covered loss is less than the applicable deductible,
32you may not receive any payment.
33Contact your insurance agent or your insurance company to
34obtain details regarding this offer of earthquake insurance and
35other coverage options.”
37(2) If the offer is made by a participating insurer as defined by
38Section 10089.5, the offer of earthquake coverage shall
contain
39all of the following language in at least 10-point boldface type:
P9 1“Your
residential property insurance policy does not cover
2earthquake damage to your home or its contents.
3To cover earthquake damage to your home and its contents you
4need to purchase a separate earthquake insurance policy. The
5coverage provided by an earthquake insurance policy is different
6from, and typically more limited than, the coverage provided by
7your residential property insurance policy.
8 California law requires insurance companies to offer earthquake
9insurance in conjunction with a residential property insurance
10policy. If you do not accept the offer of earthquake insurance below
11within 30 days of the mailing of this notice, your insurance
12company shall presume that you have not accepted this offer of
13earthquake insurance.
14You may purchase earthquake
insurance coverage on the
15following terms:
16(A) Amount of Dwelling/Building Coverage Limit:
17_______________
18(B) Deductible: ______________
19(C) Contents Coverage Limit: _______________
20(D) Additional Living Expenses Coverage Limit:
21_____________
22(E) Estimated Annual Premium:_______________
23The deductible represents the amount of damage your covered
24property must incur before the earthquake insurance coverage
25begins. If your covered loss is less than the applicable deductible,
26you may not receive any payment.
27If you choose not to accept this offer within the 30-day period,
28you may apply for earthquake coverage at a later date.
29Your insurance company contracts with the California
30Earthquake Authority (CEA) to offer earthquake insurance to its
31customers. For an additional premium, you can choose CEA
32coverage options such as higher limits for Contents or Additional
33Living Expenses, increased building code upgrade limits, or a
34lower deductible. You can also choose to buy certain CEA
35coverages separately.
36Contact your insurance agent or your insurance company to
37obtain details regarding this offer of earthquake insurance and
38other coverage options.”
P10 1(b) When the insurer, agent, or broker
establishes delivery of
2the disclosure form by obtaining the signature of the applicant or
3insured, or when an insurer, agent, or broker provides the applicant
4with the disclosure form and the applicant does not return a signed
5acknowledgment of receipt within 60 days of the date it was
6provided, there shall be a conclusive presumption that the insurer,
7agent, or broker has complied with the disclosure requirements of
8this section.
9(c) The offer may contain additional provisions not in conflict
10with or in derogation of this section.
11(d) The commissioner may only approve modifications to the
12language prescribed in subdivision (a) if all of the following
13conditions are met:
14(1) The modifications are not in conflict
with or in derogation
15of any provision of this section or Section 10089.
16(2) The modifications are necessary to ensure that the disclosure
17statement accurately reflects the coverage actually provided by
18the policy being offered.
19(3) The modifications are strictly limited to necessary changes
20so that the modified disclosure statement is otherwise identical to
21the disclosure statement prescribed in this section.
22(e) Use of the language prescribed by this section, or modified
23language approved pursuant to subdivision (d), shall constitute
24compliance with the requirements of Section 10081 by an insurer
25subject to the requirements.
26(f) This section shall become operative on January 1, 2016.
27(g) This section shall remain in effect only until January 1, 2019,
28and as of that date is repealed, unless a later enacted statute, that
29is enacted before January 1, 2019, deletes or extends that date.
begin insertSection 10083 is added to the end insertbegin insertInsurance Codeend insertbegin insert, to
31read:end insert
(a) The offer of coverage required by Section 10081
33may be made prior to, concurrent with, or within 60 days following
34the issuance or renewal of a residential property insurance policy.
35If the offer of coverage is mailed to the named insured or applicant,
36it shall be mailed to the mailing address shown on the policy of
37residential property insurance or on the application. The offer
38may be made electronically pursuant to Section 38.5.
P11 1(1) If the offer is made by a nonparticipating insurer as defined
2in Section 10089.5, the offer of earthquake coverage shall contain
3all of the following language in at least 10-point boldface type:
5“Your residential property
insurance policy does not cover
6earthquake damage to your home or its contents.
7To cover earthquake damage to your home and its contents you
8need to purchase a separate earthquake insurance policy. The
9coverage provided by an earthquake insurance policy is different
10from, and typically more limited than, the coverage provided by
11your residential property insurance policy.
12California law requires insurance companies to offer earthquake
13insurance in conjunction with a residential property insurance
14policy. If you do not accept the offer of earthquake insurance below
15within 30 days of the mailing of this notice, your insurance
16company shall presume that you have not accepted this offer of
17earthquake insurance.
18You may purchase earthquake insurance coverage on the
19following terms:
20(A) Amount of Dwelling/Building Coverage
Limit:
21______________
22(B) Deductible: ______________
23(C) Contents Coverage Limit: ________________
24(D) Additional Living Expenses Coverage Limit:
25_________________
26(E) Estimated Annual Premium:_______________
27The deductible represents the amount of damage your covered
28property must incur before the earthquake insurance coverage
29begins. If your covered loss is less than the applicable deductible,
30you may not receive any payment.
31Contact your insurance agent or your insurance company to
32obtain details regarding this offer of earthquake insurance and
33other coverage options.”
35(2) If the offer is made by a participating insurer as defined by
36Section 10089.5, the offer of earthquake coverage shall contain
37all of the following language in at least 10-point boldface type:
39“Your residential property insurance policy does not cover
40earthquake damage to your home or its contents.
P12 1To cover earthquake damage to your home and its contents you
2need to purchase a separate earthquake insurance policy. The
3coverage provided by an earthquake insurance policy is different
4from, and typically more limited than, the coverage provided by
5your residential property insurance policy.
6California law requires insurance companies to offer earthquake
7insurance in conjunction with a residential property insurance
8policy. If you do not accept the offer of earthquake insurance below
9within 30 days of the mailing of this notice,
your insurance
10company shall presume that you have not accepted this offer of
11earthquake insurance.
12You may purchase earthquake insurance coverage on the
13following terms:
14(A) Amount of Dwelling/Building Coverage Limit:
15_______________
16(B) Deductible: ______________
17(C) Contents Coverage Limit: _______________
18(D) Additional Living Expenses Coverage Limit:
19_____________
20(E) Estimated Annual Premium:_______________
21The deductible represents the amount of damage your covered
22property must incur before the earthquake insurance coverage
23begins. If your covered loss is less than the applicable deductible,
24you
may not receive any payment.
25If you choose not to accept this offer within the 30-day period,
26you may apply for earthquake coverage at a later date.
27Your insurance company contracts with the California
28Earthquake Authority (CEA) to offer earthquake insurance to its
29customers. For an additional premium, you can choose CEA
30coverage options such as higher limits for Contents or Additional
31Living Expenses, increased building code upgrade limits, or a
32lower deductible. You can also choose to buy certain CEA
33coverages separately.
34Contact your insurance agent or your insurance company to
35obtain details regarding this offer of earthquake insurance and
36other coverage options.”
38(b) When the insurer, agent, or broker establishes delivery of
39the disclosure form by obtaining the signature
of the applicant or
40insured, or when an insurer, agent, or broker provides the
P13 1applicant with the disclosure form and the applicant does not
2return a signed acknowledgment of receipt within 60 days of the
3date it was provided, there shall be a conclusive presumption that
4the insurer, agent, or broker has complied with the disclosure
5requirements of this section.
6(c) The offer may contain additional provisions not in conflict
7with or in derogation of this section.
8(d) The commissioner may only approve modifications to the
9language prescribed in subdivision (a) if all of the following
10conditions are met:
11(1) The modifications are not in conflict with or in derogation
12of any provision of this section or Section 10089.
13(2) The modifications are necessary to
ensure that the disclosure
14statement accurately reflects the coverage actually provided by
15the policy being offered.
16(3) The modifications are strictly limited to necessary changes
17so that the modified disclosure statement is otherwise identical to
18the disclosure statement prescribed in this section.
19(e) Use of the language prescribed by this section, or modified
20language approved pursuant to subdivision (d), shall constitute
21compliance with the requirements of Section 10081 by an insurer
22subject to the requirements.
23(f) (1) If an insurer issues or causes to be issued a policy with
24earthquake coverages other than the coverages specified in
25subdivisions (a) and (b) of Section 10089, pursuant to a rate
26application approved by the commissioner in accordance with
27subdivision (c) of Section 10089, no
further or other offer of
28earthquake coverage as specified in subdivisions (a) and (b) of
29Section 10089 and no further or other notice of noncoverage is
30required by the insurer if both of the following apply:
31(A) A renewal of that policy is offered.
32(B) A written notice is provided with that renewal regarding
33additional earthquake coverage that is available.
34(2) The form of the written notice in paragraph (1) shall be filed
35with the commissioner at least 30 days before its first use. The
36form shall not be used if the commissioner disapproves the form
37of the written notice within that period for being misleading or
38incomplete.
39(g) This section shall become operative on January 1, 2016.
P14 1(h) This
section shall remain in effect only until January 1, 2019,
2and as of that date is repealed, unless a later enacted statute, that
3is enacted before January 1, 2019, deletes or extends that date.
Section 10083 of the Insurance Code, as added by
5Section 13 of Chapter 369 of the Statutes of 2013, is amended to
6read:
(a) The offer of coverage required by Section 10081
8may be made prior to, concurrent with, or within 60 days following
9the issuance or renewal of a residential property insurance policy.
10If the offer of coverage is mailed to the named insured or applicant,
11it shall be mailed to the mailing address shown on the policy of
12residential property insurance or on the application.
13(1) If the offer is made by a nonparticipating insurer as defined
14in Section 10089.5, the offer of earthquake coverage shall contain
15all of the following language in at least 10-point boldface type:
17“Your residential property insurance
policy does not cover
18earthquake damage to your home or its contents.
19To cover earthquake damage to your home and its contents you
20need to purchase a separate earthquake insurance policy. The
21coverage provided by an earthquake insurance policy is different
22from, and typically more limited than, the coverage provided by
23your
residential property insurance policy.
24 California law requires insurance companies to offer earthquake
25insurance in conjunction with a residential property insurance
26policy. If you do not accept the offer of earthquake insurance below
27within 30 days of the mailing of this notice, your insurance
28company shall presume that you have not accepted this offer of
29earthquake insurance.
30You may purchase earthquake insurance coverage on the
31following terms:
32(A) Amount of Dwelling/Building Coverage Limit:
33_______________
34(B) Deductible: ______________
35(C) Contents Coverage Limit: _______________
36(D) Additional Living Expenses Coverage Limit:
37_____________
38(E) Estimated Annual Premium:_______________
39The deductible represents the amount of damage your covered
40property must incur before the earthquake insurance coverage
P15 1begins. If your covered loss is less than the applicable deductible,
2you may not receive any payment.
3Contact your insurance agent or your insurance company to
4obtain details regarding this offer of earthquake insurance and
5other coverage options.”
7(2) If the offer is made by a participating insurer as defined by
8Section 10089.5, the offer of earthquake coverage shall contain
9all
of the following language in at least 10-point boldface type:
11“Your
residential property insurance policy does not cover
12earthquake damage to your home or its contents.
13To cover earthquake damage to your home and its contents you
14need to purchase a separate earthquake insurance policy. The
15coverage provided by an earthquake insurance policy is different
16from, and typically more limited than, the coverage provided by
17your
residential property insurance policy.
18 California law requires insurance companies to offer earthquake
19insurance in conjunction with a residential property insurance
20policy. If you do not accept the offer of earthquake insurance below
21within 30 days of the mailing of this notice, your insurance
22company shall presume that you have not accepted this offer of
23earthquake insurance.
24You may purchase earthquake insurance coverage on the
25following terms:
26(A) Amount of Dwelling/Building Coverage Limit:
27_______________
28(B) Deductible: ______________
29(C) Contents Coverage Limit: _______________
30(D) Additional Living Expenses Coverage Limit:
31_____________
32(E) Estimated Annual Premium:_______________
33The deductible represents the amount of damage your covered
34property must incur before the earthquake insurance coverage
35begins. If your covered loss is less than the applicable deductible,
36you may not receive any payment.
37If you choose not to accept this offer within the 30-day period,
38you may apply for earthquake coverage at a later date.
39Your insurance company contracts with the California
40Earthquake Authority (CEA) to offer earthquake insurance to its
P16 1customers. For an additional premium, you can choose CEA
2coverage options such as higher limits
for Contents or Additional
3Living Expenses, increased building code upgrade limits, or a
4lower deductible. You can also choose to buy certain CEA
5coverages separately.
6Contact your insurance agent or your insurance company to
7obtain details regarding this offer of earthquake insurance and
8other coverage options.”
9
10(b) When the insurer, agent, or broker establishes delivery of
11the disclosure form by obtaining the signature of the applicant or
12insured, or when an insurer, agent, or broker provides the applicant
13with the disclosure form and the applicant does not return a signed
14acknowledgment of receipt within 60 days of the date it was
15provided, there shall be a conclusive presumption that the insurer,
16agent, or broker has
complied with the disclosure requirements of
17this section.
18(c) The offer may contain additional provisions not in conflict
19with or in derogation of this section.
20(d) The commissioner may only approve modifications to the
21language prescribed in subdivision (a) if all of the following
22conditions are met:
23(1) The modifications are not in conflict with or in derogation
24of any provision of this section or Section 10089.
25(2) The modifications are necessary to ensure that the disclosure
26statement accurately reflects the coverage actually provided by
27the policy being offered.
28(3) The modifications are
strictly limited to necessary changes
29so that the modified disclosure statement is otherwise identical to
30the disclosure statement prescribed in this section.
31(e) Use of the language prescribed by this section, or modified
32language approved pursuant to subdivision (d), shall constitute
33compliance with the requirements of Section 10081 by an insurer
34subject thereto.
35(f) This section shall become operative on January 1, 2019.
begin insertSection 10083 of the end insertbegin insertInsurance Codeend insertbegin insert, as added by
37Section 13 of Chapter 369 of the Statutes of 2013, is amended to
38read:end insert
(a) The offer of coverage required by Section 10081
40may be made prior to, concurrent with, or within 60 days following
P17 1the issuance or renewal of a residential property insurance policy.
2If the offer of coverage is mailed to the named insured or applicant,
3it shall be mailed to the mailing address shown on the policy of
4residential property insurance or on the application.begin delete The offer of
5earthquake coverage shall contain the following language in at
6least 10-point boldface type:end delete
8YOUR POLICY DOES NOT PROVIDE COVERAGE
9AGAINST THE PERIL OF EARTHQUAKE.
10CALIFORNIA LAW REQUIRES THAT EARTHQUAKE
11COVERAGE BE OFFERED TO YOU AT YOUR OPTION.
12WARNING: THESE COVERAGES MAY DIFFER
13SUBSTANTIALLY FROM AND PROVIDE LESS
14PROTECTION THAN THE COVERAGE PROVIDED BY YOUR
15HOMEOWNERS’ INSURANCE POLICY. THERE ARE
16EXCLUSIONS AND LIMITATIONS SUCH AS
17OUTBUILDINGS, SWIMMING POOLS, MASONRY FENCES,
18AND MASONRY CHIMNEYS. THIS
DISCLOSURE FORM
19CONTAINS ONLY A GENERAL DESCRIPTION OF
20COVERAGES AND IS NOT PART OF YOUR EARTHQUAKE
21INSURANCE POLICY. ONLY THE SPECIFIC PROVISIONS
22OF YOUR POLICY WILL DETERMINE WHETHER A
23PARTICULAR LOSS IS COVERED AND, IF SO, THE
24AMOUNT PAYABLE.
25THE COVERAGE, SUBJECT TO POLICY PROVISIONS,
26MAY BE PURCHASED AT ADDITIONAL COST ON THE
27FOLLOWING TERMS:
28(A) AMOUNT OF DWELLING COVERAGE: ____
29(B) APPLICABLE DEDUCTIBLE: ____ IF YOUR LOSS IS
30BELOW THIS AMOUNT, YOU MAY NOT RECEIVE ANY
31PAYMENT FROM YOUR COVERAGE.
32YOUR INSURANCE COMPANY OR AGENT WILL
33PROVIDE WRITTEN NOTICE AS TO HOW THE
34DEDUCTIBLE APPLIES TO THE MARKET VALUE OF YOUR
35COVERAGE, THE INSURED VALUE OF YOUR COVERAGE,
36OR THE REPLACEMENT VALUE OF YOUR COVERAGE.
37(C) CONTENTS COVERAGE: ____
38IF YOUR LOSS DOES NOT EXCEED THE DEDUCTIBLE
39FOR THE DWELLING, YOU WILL NOT RECEIVE ANY
40PAYMENT FOR THIS COVERAGE.
P18 1YOUR INSURANCE COMPANY OR AGENT WILL
2PROVIDE WRITTEN NOTICE AS TO HOW THE
3DEDUCTIBLE APPLIES TO THE AMOUNT YOU RECEIVE
4PURSUANT TO THIS COVERAGE.
5(D) ADDITIONAL LIVING EXPENSES: ____
6(E) RATE OR PREMIUM: ____
7YOU MUST ASK THE COMPANY TO ADD EARTHQUAKE
8COVERAGE WITHIN 30 DAYS FROM THE DATE OF
9MAILING OF THIS NOTICE OR IT SHALL BE
10CONCLUSIVELY PRESUMED THAT YOU HAVE NOT
11ACCEPTED THIS OFFER.
12THIS COVERAGE SHALL BE EFFECTIVE ON THE DAY
13YOUR ACCEPTANCE OF THIS OFFER IS RECEIVED BY US.
14
15(1) If the offer is made by a nonparticipating insurer as defined
16in Section 10089.5, the offer of earthquake coverage shall contain
17all of the following language in at least 10-point boldface type:
19“Your residential property insurance policy does not cover
20earthquake damage to your home or its contents.
21To cover earthquake damage to your home and its contents you
22need to purchase a separate earthquake insurance policy. The
23coverage provided by an earthquake insurance policy is different
24from, and typically more limited than, the coverage provided by
25your residential property insurance policy.
26California law requires insurance companies to offer earthquake
27insurance in conjunction with a residential property insurance
28policy. If you do not accept the offer of earthquake insurance below
29within 30 days of the mailing of this notice, your insurance
30company shall presume that you have not accepted this offer of
31earthquake insurance.
32You may purchase earthquake insurance coverage on the
33following terms:
34(A) Amount of Dwelling/Building Coverage Limit:
35_______________
36(B) Deductible: ______________
end insertbegin insert37(C) Contents Coverage Limit: _______________
end insertbegin insert
38(D) Additional Living Expenses Coverage Limit:
39_____________
40(E) Estimated Annual Premium:_______________
end insertbegin insert
P19 1The deductible represents the amount of damage your covered
2property must incur before the earthquake insurance coverage
3begins. If your covered loss is less than the applicable deductible,
4you may not receive any payment.
5Contact your insurance agent or your insurance company to
6obtain details regarding this offer of earthquake insurance and
7other coverage options.”
9(2) If the offer is made by a participating insurer as defined by
10Section 10089.5, the offer of earthquake coverage shall contain
11all of the following language in at least 10-point boldface type:
13“Your residential property insurance policy does not cover
14earthquake damage to your home or its contents.
15To cover earthquake damage to your home and its contents you
16need to purchase a separate earthquake insurance policy. The
17coverage provided by an earthquake insurance policy is different
18from, and typically more limited than, the coverage provided by
19your residential property insurance policy.
20California law requires insurance companies to offer earthquake
21insurance in conjunction with a residential property insurance
22policy. If you do not accept the offer of earthquake insurance below
23within 30 days of the mailing of this notice, your insurance
24company shall presume that you have not accepted this offer of
25earthquake insurance.
26You may purchase earthquake insurance coverage on the
27following
terms:
28(A) Amount of Dwelling/Building Coverage Limit:
29_______________
30(B) Deductible: ______________
end insertbegin insert31(C) Contents Coverage Limit: _______________
end insertbegin insert
32(D) Additional Living Expenses Coverage Limit:
33_____________
34(E) Estimated Annual Premium:_______________
end insertbegin insert
35The deductible represents the amount of damage your covered
36property must incur before the earthquake insurance coverage
37begins. If your covered loss is less than the applicable deductible,
38you may not receive any payment.
39If you choose not to accept this offer within the 30-day period,
40you may apply for earthquake coverage at a later date.
P20 1Your insurance company contracts with the California
2Earthquake Authority (CEA) to offer earthquake insurance to its
3customers. For an additional premium, you can choose CEA
4coverage options such as higher limits for Contents or Additional
5Living Expenses, increased building code upgrade limits, or a
6lower deductible. You can also choose to buy certain CEA
7coverages separately.
8Contact your insurance agent or your insurance company to
9obtain details regarding this offer of earthquake insurance and
10other coverage options.”
12(b) When the insurer, agent, or broker establishes delivery of
13the disclosure form by obtaining the signature of the applicant or
14insured, or when an insurer, agent, or
broker provides the applicant
15 with the disclosure form and the applicant does not return a signed
16acknowledgment of receipt within 60 days of the date it was
17provided, there shall be a conclusive presumption that the insurer,
18agent, or broker has complied with the disclosure requirements of
19this section.
20(c) The offer may contain additional provisions not in conflict
21with or in derogation of this section.
22(d) The commissioner may only approve modifications to the
23language prescribed in subdivision (a) if all of the following
24conditions are met:
25(1) The modifications are not in conflict with or in derogation
26of any provision of this section or Section 10089.
27(2) The modifications are necessary to ensure that the disclosure
28statement accurately reflects
the coverage actually provided by
29the policy being offered.
30(3) The modifications are strictly limited to necessary changes
31so that the modified disclosure statement is otherwise identical to
32the disclosure statement prescribed in this section.
33(e) Use of the language prescribed by this section, or modified
34language approved pursuant to subdivision (d), shall constitute
35compliance with the requirements of Section 10081 by an insurer
36subject thereto.
37(f) (1) If an insurer issues or causes to be issued a policy with
38earthquake coverages other than the coverages specified in
39subdivisions (a) and (b) of Section 10089, pursuant to a rate
40application approved by the commissioner in accordance with
P21 1subdivision (c) of
Section 10089, no further or other offer of
2earthquake coverage as specified in subdivisions (a) and (b) of
3Section 10089 and no further or other notice of noncoverage is
4required by the insurer if both of the following apply:
5(A) A renewal of that policy is offered.
end insertbegin insert
6(B) A written notice is provided with that renewal regarding
7additional earthquake coverage that is available.
8(2) The form of the written notice in paragraph (1) shall be filed
9with the commissioner at least 30 days before its first use. The
10form shall not be used if the commissioner disapproves the form
11of the written notice within that period for being misleading or
12incomplete.
13(f)
end delete14begin insert(g)end insert This section shall become operative on January 1, 2019.
Section 10086 of the Insurance Code, as amended by
16Section 14 of Chapter 369 of the Statutes of 2013, is amended to
17read:
(a) If an offer of earthquake coverage is accepted, the
19coverage shall be continued at the applicable rates and conditions
20for the policy term, provided the policy of residential property
21insurance is not terminated by the named insured or insurer.
22(1) At any renewal, an insurer may modify the terms and
23conditions of an existing policy, rider, or endorsement providing
24coverage against loss or damage caused by the peril of earthquake
25if the modified terms and conditions provide the minimum
26coverages required by Section 10089.
27(2) An insurer that modifies the terms and conditions of an
28existing policy, rider, or endorsement
shall provide the insured
29with the renewal notice in a stand-alone disclosure document
30stating the changes in the terms and conditions of the insured’s
31existing policy, rider, or endorsement. The offer of renewal may
32be made electronically pursuant to Section 38.5. Proof of mailing
33of the disclosure document by first-class mail to a named insured
34at the mailing address shown on the policy or application, or proof
35consistent with Section 38.5 that the offer of renewal of coverage
36was sent to the named insured or applicant by electronic
37transmission, creates a conclusive presumption that the disclosure
38document was provided. The disclosure shall include the following
39statement in 14-point boldface type:
P22 1 “THE COVERAGE IN THE POLICY WE ARE OFFERING
2YOU WITH THIS RENEWAL HAS BEEN REDUCED, AND
3SUBSTANTIALLY DIFFERS FROM
THE COVERAGES
4PROVIDED BY YOUR HOMEOWNERS’ POLICY.
5INSURANCE COMPANIES ARE ALLOWED TO RENEW
6EARTHQUAKE INSURANCE POLICIES WITH COVERAGE
7THAT IS REDUCED FROM THE COVERAGE YOU
8PREVIOUSLY PURCHASED. YOU MAY REQUEST A
9SAMPLE COPY OF THIS NEW POLICY TO REVIEW PRIOR
10TO MAKING A DECISION TO ACCEPT THIS RENEWAL,
11AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
12DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE
13COPY SHALL NOT CHANGE OR EXTEND THE POLICY
14EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
15A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS
16NOTICE.”
18The commissioner shall approve the form of the summary at the
19time he or she approves the policy. The summary shall include the
20information contained in subdivision (a) of Section 10083, and
21may be included with the renewal notice in standard
type.
22The commissioner may approve substantially similar disclosure
23forms if necessary to accurately disclose relevant information to
24the policyholder. The commissioner may also approve disclosure
25forms substantially similar to the disclosure statement required by
26Section 10083 if necessary to accurately disclose relevant
27information to the policyholder.
28(3) If the earthquake coverage is provided by a policy issued
29by the California Earthquake Authority, the following disclosure
30shall be provided in 14-point boldface type:
35THIS POLICY IS BEING PURCHASED FROM THE
36CALIFORNIA EARTHQUAKE AUTHORITY (“CEA”). THE
37COVERAGE IN THIS
CEA POLICY SUBSTANTIALLY
38DIFFERS FROM THE COVERAGES PROVIDED IN YOUR
39HOMEOWNER’S POLICY. THE CEA IS NOT PART OF OR
40ASSOCIATED WITH YOUR HOMEOWNER’S INSURANCE
P23 1COMPANY. IF LOSSES AS A RESULT OF AN EARTHQUAKE
2OR A SERIES OF EARTHQUAKES EXCEED THE
3AVAILABLE RESOURCES OF THE CEA, THIS POLICY IS
4NOT COVERED BY THE CALIFORNIA INSURANCE
5GUARANTY ASSOCIATION. THEREFORE, THE
6CALIFORNIA INSURANCE GUARANTY ASSOCIATION
7WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR
8ASSETS IF THE CEA BECOMES INSOLVENT AND IS
9UNABLE TO MAKE PAYMENTS AS PROMISED. IN
10ADDITION, YOUR CEA POLICY MAY BE SUBJECT TO
11FUTURE SURCHARGES OF THE POLICY PREMIUM IN
12CERTAIN CASES WHERE AN EARTHQUAKE OR SERIES
13OF EARTHQUAKES HAS EXCEEDED AVAILABLE
14RESOURCES TO PAY CLAIMS. IN THAT CASE, THIS
15MEANS THAT IN ADDITION TO THE ANNUAL PREMIUM,
16YOU MAY BE CHARGED UP TO AN ADDITIONAL 20% OF
17THE
PREMIUM.”
19(b) If the offer is not accepted, the insurer or any affiliated
20insurer shall be required on an every other year basis to offer
21earthquake coverage in connection with any continuation, renewal,
22or reinstatement of the policy following any lapse thereof, or with
23respect to any other policy that extends, changes, supersedes, or
24replaces the policy of residential property insurance. The offer
25may be made electronically pursuant to Section 38.5.
26(c) Nothing in this section shall preclude the named insured
27from terminating the earthquake coverage at any time.
28(d) This section shall remain in effect only until
January 1, 2016,
29and as of that date is repealed, unless a later enacted statute, that
30is enacted before January 1, 2016, deletes or extends that date.
Section 10086 is added to the Insurance Code, to read:
(a) If an offer of earthquake coverage, made pursuant
33to Section 10081, is accepted, the coverage shall be continued at
34the applicable rates and conditions for the policy term, provided
35the policy of residential property insurance is not terminated by
36the named insured or insurer.
37(1) At any renewal, an insurer may modify the terms and
38conditions of an existing policy, rider, or endorsement providing
39coverage against loss or damage caused by the peril of earthquake
P24 1if the modified terms and conditions provide the minimum
2coverages required by Section 10089.
3(2) An insurer that modifies the terms and
conditions of an
4existing policy, rider, or endorsement shall provide the insured
5with the renewal notice in a stand-alone disclosure document
6stating the changes in the terms and conditions of the insured’s
7existing policy, rider, or endorsement. The offer of renewal may
8be made electronically pursuant to Section 38.5. Proof of mailing
9of the disclosure document by first-class mail to a named insured
10at the mailing address shown on the policy or application, or proof
11consistent with Section 38.5 that the offer of renewal of coverage
12was sent to the named insured or applicant by electronic
13transmission, creates a conclusive presumption that the disclosure
14document was provided. The disclosure shall include the following
15statement in 14-point boldface type:
17“THE COVERAGE IN THE POLICY WE ARE OFFERING
18YOU WITH
THIS RENEWAL HAS BEEN REDUCED, AND
19SUBSTANTIALLY DIFFERS FROM THE COVERAGES
20PROVIDED BY YOUR HOMEOWNERS’ POLICY.
21INSURANCE COMPANIES ARE ALLOWED TO RENEW
22EARTHQUAKE INSURANCE POLICIES WITH COVERAGE
23THAT IS REDUCED FROM THE COVERAGE YOU
24PREVIOUSLY PURCHASED. YOU MAY REQUEST A
25SAMPLE COPY OF THIS NEW POLICY TO REVIEW PRIOR
26TO MAKING A DECISION TO ACCEPT THIS RENEWAL,
27AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
28DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE
29COPY SHALL NOT CHANGE OR EXTEND THE POLICY
30EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
31A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS
32NOTICE.”
34The commissioner shall approve the form of the summary at the
35time he or she approves the policy. The summary shall include the
36information contained in subdivision (a) of Section 10083, and
37may
be included with the renewal notice in standard type.
38The commissioner may approve substantially similar disclosure
39forms if necessary to accurately disclose relevant information to
40the policyholder. The commissioner may also approve disclosure
P25 1forms substantially similar to the disclosure statement required by
2Section 10083 if necessary to accurately disclose relevant
3information to the policyholder.
4(b) If the offer of earthquake coverage made pursuant to Section
510081 is not accepted, the insurer or any affiliated insurer shall be
6required on an every other year basis to offer earthquake coverage
7in connection with any continuation, renewal, or reinstatement of
8the policy following any lapse thereof, or with respect to any other
9policy that extends, changes, supersedes, or replaces the policy of
10
residential property insurance. The offer may be made
11electronically pursuant to Section 38.5.
12(c) Nothing in this section shall preclude the named insured
13from terminating the earthquake coverage at any time.
14(d) This section shall become operative on January 1, 2016.
15(e) This section shall remain in effect only until January 1, 2019,
16and as of that date is repealed, unless a later enacted statute, that
17is enacted before January 1, 2019, deletes or extends that date.
Section 10086 of the Insurance Code, as added by
19Section 15 of Chapter 369 of the Statutes of 2013, is amended to
20read:
(a) If an offer of earthquake coverage, made pursuant
22to Section 10081, is accepted, the coverage shall be continued at
23the applicable rates and conditions for the policy term, provided
24the policy of residential property insurance is not terminated by
25the named insured or insurer.
26(1) At any renewal, an insurer may modify the terms and
27conditions of an existing policy, rider, or endorsement providing
28coverage against loss or damage caused by the peril of earthquake
29if the modified terms and conditions provide the minimum
30coverages required by Section 10089.
31(2) An insurer that modifies the terms and conditions of an
32existing
policy, rider, or endorsement shall provide the insured
33with the renewal notice in a stand-alone disclosure document
34stating the changes in the terms and conditions of the insured’s
35existing policy, rider, or endorsement. Proof of mailing of the
36disclosure document by first-class mail to a named insured at the
37mailing address shown on the policy or application creates a
38conclusive presumption that the disclosure document was provided.
39The disclosure shall include the following statement in 14-point
40boldface type:
P26 1
2“THE COVERAGE IN THE POLICY WE ARE OFFERING
3YOU WITH THIS RENEWAL HAS BEEN REDUCED, AND
4SUBSTANTIALLY DIFFERS FROM THE COVERAGES
5PROVIDED BY YOUR HOMEOWNERS’ POLICY.
6INSURANCE COMPANIES ARE ALLOWED TO RENEW
7EARTHQUAKE INSURANCE POLICIES WITH COVERAGE
8THAT IS REDUCED
FROM THE COVERAGE YOU
9PREVIOUSLY PURCHASED. YOU MAY REQUEST A
10SAMPLE COPY OF THIS NEW POLICY TO REVIEW PRIOR
11TO MAKING A DECISION TO ACCEPT THIS RENEWAL,
12AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
13DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE
14COPY SHALL NOT CHANGE OR EXTEND THE POLICY
15EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
16A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS
17NOTICE.”
18
19The commissioner shall approve the form of the summary at the
20time he or she approves the policy. The summary shall include the
21information contained in subdivision (a) of Section 10083, and
22may be included with the renewal notice in standard type.
23The commissioner may approve substantially similar disclosure
24forms if necessary to accurately
disclose relevant information to
25the policyholder. The commissioner may also approve disclosure
26forms substantially similar to the disclosure statement required by
27Section 10083 if necessary to accurately disclose relevant
28information to the policyholder.
29(b) If the offer of earthquake coverage made pursuant to Section
3010081 is not accepted, the insurer or any affiliated insurer shall be
31required on an every other year basis to offer earthquake coverage
32in connection with any continuation, renewal, or reinstatement of
33the policy following any lapse thereof, or with respect to any other
34policy that extends, changes, supersedes, or replaces the policy of
35residential property insurance.
36(c) Nothing in this section shall preclude the named insured
37from terminating the earthquake
coverage at any time.
38(d) This section shall become operative on January 1, 2019.
Section 10089.6 of the Insurance Code is amended to
40read:
(a) There is hereby created the California Earthquake
2Authority, which shall be administered under the authority of the
3commissioner and have the powers conferred by this chapter. The
4authority shall be authorized to transact insurance in this state as
5necessary to sell policies of basic residential earthquake insurance
6in the manner set forth in Sections 10089.26, 10089.27, and
710089.28. The authority shall have no authority to transact any
8other type of insurance business.
9(b) (1) The investments of the authority shall be limited to those
10securities eligible under Section 16430 of the Government Code.
11(2) The rights, obligations, and duties owed by the authority to
12its insureds, beneficiaries of insureds, and applicants for insurance
13shall be the same as the rights, obligations, and duties owed by
14insurers to its insureds, beneficiaries of insureds, and applicants
15for insurance under common law, regulations, and statutes. The
16authority shall be liable to its insureds, beneficiaries of insureds,
17and applicants for insurance as an insurer is liable to its insureds,
18beneficiaries of insureds, and applicants for insurance under
19common law, regulations, and statutes.
20(c) The operating expenses of the authority shall be capped at
21not more than 6 percent of the premium income received by the
22authority. The funds shall be available to pay any advocacy fees
23awarded in a proceeding under
subdivision (c) of Section 10089.11.
24(d) For purposes of this section, the term “operating expenses
25of the authority” excludes solely the following:
26(1) The costs of and transaction expenses associated with
27risk-transfer purchases, including the purchase of reinsurance and
28with capital-market contracts.
29(2) The expense of securing and repaying bonds.
30(3) The cost of repayment of bonds guaranteed, insured, or
31otherwise backed by any department or agency of the United States
32or of this state, or by any private entity.
33(4) Payments to third parties for all of the following services
34
provided to the authority:
35(A) Investment.
36(B) Loss-modeling.
37(C) Legal services.
38(5) Costs associated with the authority’s efforts to acquaint the
39public with and market authority products, promote earthquake
P28 1preparedness, and earthquake-loss mitigation under the authority’s
2duly adopted strategic plan.
3(6) Producer compensation.
4(7) Participating insurer fees and reimbursement amounts arising
5under written contracts.
6(8) Amounts paid by the authority to
support research in seismic
7science and seismic engineering.
8(9) Loans, grants, and expenses to support and maintain the
9authority’s earthquake loss-mitigation goals and programs, whether
10conducted by the authority alone or in collaboration with or by
11other persons.
12(10) The costs of and loss-adjustment expenses associated with
13adjusting and paying policyholder claims for earthquake losses
14that are incurred by the authority under its earthquake insurance
15policies, including all costs and expenses associated with
16claim-related litigation, provided that all of those costs and
17expenses shall be reported to the Legislature in the manner required
18by subdivision (e) of Section 10089.13.
Section 10089.26 of the Insurance Code is amended
20to read:
(a) The authority shall issue policies of basic
22residential earthquake insurance, including an option for earthquake
23loss assessment policies for individual condominium unit
24properties, to any owner of a qualifying residential property, as
25long as the owner has secured a policy of residential property
26insurance from a participating insurer.
27(1) For purposes of this section, earthquake loss assessment
28coverage shall be issued in a minimum amount of fifty thousand
29dollars ($50,000) for individual condominium units valued at more
30than one hundred thirty-five thousand dollars ($135,000).
31Earthquake loss assessment coverage shall be issued in a
minimum
32amount of twenty-five thousand dollars ($25,000) for individual
33condominium units of one hundred thirty-five thousand dollars
34($135,000) in value or less. The value of the land shall be excluded
35when determining the value of the condominium, as it relates to
36the earthquake loss assessment coverage offered by the authority.
37(2) The panel shall submit to the board, and the board shall
38approve, rates for earthquake loss assessment coverage that
39reasonably balance the earthquake loss assessment coverages
40offered and the potential exposure to earthquake loss resulting
P29 1from an earthquake loss assessment policy as compared to the
2coverages offered and the potential exposure to earthquake loss
3resulting from residential property other than individual
4condominium policies.
5It is the intent of the
Legislature, to the extent practicable, that
6rates charged by the authority to condominium loss assessment
7policyholders and residential property owner policyholders are
8treated equitably, and that a proportionate share of premiums is
9paid for potential exposure to loss, to the authority.
10(b) Nothing in this section shall prohibit a participating or
11nonparticipating insurer from offering a condominium earthquake
12loss assessment policy for different amounts of coverage other
13than those offered by the authority.
Section 10089.28 of the Insurance Code is amended
15to read:
(a) All policies of residential earthquake insurance
17provided by the authority shall be written by the authority.
18Authority policies shall be marketed and policyholders serviced
19by the participating insurer that writes the underlying policy of
20residential property insurance, and participating insurers shall be
21reasonably compensated for the claims and policyholder services
22they provide on behalf of the authority. Authority services may be
23performed on behalf of the authority in any reasonable manner by
24the participating insurer that is in compliance with statutory,
25regulatory, and case laws regarding claims handling practices;
26provided, however, where the authority has promulgated specific
27procedures
to govern its operations, the participating insurer shall
28conform its practices to those procedures. The authority procedures
29shall comply with statutory, regulatory, and case law governing
30claims handling practices. Nothing in this provision shall be
31deemed or construed to affect any duty or liability of the authority
32or participating carrier as set forth in paragraphs (2) and (3) of
33subdivision (e) of Section 10089.7.
34(b) The participating insurer shall notify each of its insureds
35that the authority is the provider of earthquake coverage under the
36policy. The form and method of notice shall meet standards
37established by the commissioner by regulation. The authority shall
38provide to participating insurers appropriate applications and forms
39and shall maintain records of all policies written, moneys received,
40and claims paid.
P30 1(c) The duty of an agent or broker to investigate the financial
2condition of the authority before placement of insurance shall be
3the same as the duty of an agent or broker to investigate the
4financial condition of an admitted insurer before placement of a
5policy of insurance.
6(d) This section shall remain in effect only until January 1, 2016,
7and as of that date is repealed, unless a later enacted statute, that
8is enacted before January 1, 2016, deletes or extends that date.
Section 10089.28 is added to the Insurance Code, to
10read:
(a) All policies of residential earthquake insurance
12provided by the authority shall be written by the authority.
13Authority policies shall be marketed and policyholders serviced
14by the participating insurer that writes the underlying policy of
15residential property insurance, and participating insurers shall be
16reasonably compensated for the claims and policyholder services
17they provide on behalf of the authority. Authority services may be
18performed on behalf of the authority in any reasonable manner by
19the participating insurer that is in compliance with statutory,
20regulatory, and case law regarding claims handling practices;
21provided, however, where the authority has promulgated specific
22procedures to govern its
operations, the participating insurer shall
23conform its practices to those procedures. The authority procedures
24shall comply with statutory, regulatory, and case law governing
25claims handling practices. Nothing in this provision shall be
26deemed or construed to affect any duty or liability of the authority
27or participating carrier as set forth in paragraphs (2) and (3) of
28subdivision (e) of Section 10089.7.
29(b) Concurrent with the issuance or renewal by the authority of
30a residential earthquake insurance policy, the following disclosure
31shall be provided to the insured in 14-point boldface type:
32
33“California Earthquake Authority Policy Disclosure
34You have purchased a California Earthquake Authority
(CEA)
35earthquake insurance policy, which can help you cover the cost of
36repairing damage to your property and possessions caused by an
37earthquake.
38The CEA is not part of your homeowners’ insurance company.
39Please keep in mind these important things about your CEA
40insurance policy:
P31 11. CEA policy coverages are different from the coverages
2provided in your homeowners’ insurance policy. For example, this
3policy does not cover earthquake damage to swimming pools, and
4it may provide more limited coverage for chimneys, outbuildings,
5and masonry fences. These are examples of possible differences
6between your CEA policy and your homeowners’ policy, and you
7should consult your CEA policy to understand the types of losses
8that are limited or excluded and those that are covered.
92. If CEA’s liability for earthquake losses exceeds the CEA’s
10available resources the CEA may reduce its payment to you or pay
11you in installments. This policy is not covered by the California
12Insurance Guarantee Association, and therefore, the California
13Insurance Guarantee Association will not pay your claims if the
14CEA becomes insolvent and is unable to make payments as
15promised.
163. In certain cases, your CEA policy premium may be subject
17to future surcharges if the CEA’s obligations to pay earthquake
18losses rise to a pre-defined level. In that case, in addition to your
19annual premium you may be charged up to an additional 20% of
20that premium.”
21
22(c) The authority shall provide to
participating insurers
23appropriate applications and forms and shall maintain records of
24all policies written, moneys received, and claims paid.
25(d) The duty of an agent or broker to investigate the financial
26condition of the authority before placement of insurance shall be
27the same as the duty of an agent or broker to investigate the
28financial condition of an admitted insurer before placement of a
29
policy of insurance.
30(e) This section shall become operative on January 1, 2016.
Section 10089.42 is added to the Insurance Code, to
32read:
(a) At least once each year a participating insurer
34shall provide each of its residential property insureds with
35marketing documents produced at the authority’s expense.
36(b) This section shall become operative on January 1, 2016.
Section 1.5 of this bill incorporates amendments to
38Section 10083 of the Insurance Code, as amended by Section 12
39of Chapter 369 of the Statutes of 2013, proposed by both this bill
40and Assembly Bill 2735. It shall only become operative if (1) both
P32 1bills are enacted and become effective on or before January 1,
22015, (2) each bill amends Section 10083 of the Insurance Code,
3as amended by Section 12 of Chapter 369 of the Statutes of 2013,
4and (3) this bill is enacted after Assembly Bill 2735, in which case
5Section 1 of this bill shall not become operative.
Section 2.5 of this bill incorporates Section 10083 of
7the Insurance Code, as proposed to be added by this bill and
8amended by Assembly Bill 2735. It shall only become operative if
9(1) both bills are enacted and become effective on or before
10January 1, 2015, and (2) this bill adds Section 10083 to the
11Insurance Code and Assembly Bill 2735 amends Section 10083 of
12the Insurance Code, in which case Section 2 of this bill shall not
13become operative.
Section 3.5 of this bill incorporates amendments to
15Section 10083 of the Insurance Code, as added by Section 13 of
16Chapter 369 of the Statutes of 2013, proposed by both this bill and
17Assembly Bill 2735. It shall only become operative if (1) both bills
18are enacted and become effective on or before January 1, 2015,
19and (2) each bill amends Section 10083 of the Insurance Code, as
20added by Section 13 of Chapter 369 of the Statutes of 2013, and
21(3) this bill is enacted after Assembly Bill 2735, in which case
22Section 3 of this bill shall not become operative.
O
96