AB 2735, as introduced, Committee on Insurance. Earthquake insurance.
Existing law prohibits a policy of residential property insurance from being issued or delivered unless the named insured is offered coverage for loss or damage caused by an earthquake, and specifies the minimum coverage that is required to be offered. If an offer of earthquake coverage is not accepted, insurers are required to subsequently offer earthquake coverage to residential policyholders on an every other year basis.
This bill would exempt those insurers whose insureds have accepted earthquake coverage that does not meet the minimum coverage requirement but has been approved by the Insurance Commissioner from being required to offer earthquake coverage meeting the minimum coverage requirements at any renewal if the insurer has offered a renewal of that policy and has provided written notice with that renewal regarding additional earthquake coverage available.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 10086 of the Insurance Code, as amended
2by Section 14 of Chapter 369 of the Statutes of 2013, is amended
3to read:
(a) If an offer of earthquake coverage is accepted, the
5coverage shall be continued at the applicable rates and conditions
6for the policy term, provided the policy of residential property
7insurance is not terminated by the named insured or insurer.
8(1) At any renewal, an insurer may modify the terms and
9conditions of an existing policy, rider, or endorsement providing
10coverage against loss or damage caused by the peril of earthquake
11if the modified terms and conditions provide the minimum
12coverages required by Section 10089.
13(2) An insurer that modifies the terms and conditions of an
14existing policy, rider, or endorsement shall provide the insured
15with the renewal notice in a stand-alone disclosure
document
16stating the changes in the terms and conditions of the insured’s
17existing policy, rider, or endorsement. The offer of renewal may
18be made electronically pursuant to Section 38.5. Proof of mailing
19of the disclosure document by first-class mail to a named insured
20at the mailing address shown on the policy or application, or proof
21consistent with Section 38.5 that the offer of renewal of coverage
22was sent to the named insured or applicant by electronic
23transmission, creates a conclusive presumption that the disclosure
24document was provided. The disclosure shall include the following
25statement in 14-point boldface type:
26THE COVERAGE IN THE POLICY WE ARE OFFERING
27YOU WITH THIS RENEWAL HAS BEEN REDUCED, AND
28SUBSTANTIALLY DIFFERS FROM THE COVERAGES
29PROVIDED BY YOUR HOMEOWNERS’ POLICY.
30INSURANCE COMPANIES ARE ALLOWED TO RENEW
31EARTHQUAKE INSURANCE POLICIES WITH COVERAGE
32THAT IS REDUCED FROM THE COVERAGE YOU
33PREVIOUSLY PURCHASED. YOU MAY REQUEST A
34SAMPLE COPY OF
THIS NEW POLICY TO REVIEW PRIOR
35TO MAKING A DECISION TO ACCEPT THIS RENEWAL,
36AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
37DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE
38COPY SHALL NOT CHANGE OR EXTEND THE POLICY
P3 1EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
2A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS
3NOTICE.
4The commissioner shall approve the form of the summary at the
5time he or she approves the policy. The summary shall include the
6information contained in subdivision (a) of Section 10083, and
7may be included with the renewal notice in standard type.
8The commissioner may approve substantially similar disclosure
9forms if necessary to accurately disclose relevant information to
10the policyholder. The commissioner may also approve disclosure
11forms substantially similar to the disclosure statement required by
12Section 10083 if necessary to accurately disclose relevant
13information to the policyholder.
14(3) If the earthquake coverage is provided by a policy issued
15by the California Earthquake Authority, the following disclosure
16shall be provided in 14-point boldface type:
21THIS POLICY IS BEING PURCHASED FROM THE
22CALIFORNIA EARTHQUAKE AUTHORITY (“CEA”). THE
23COVERAGE IN THIS CEA POLICY SUBSTANTIALLY
24DIFFERS FROM THE COVERAGES PROVIDED IN YOUR
25HOMEOWNER’S POLICY. THE CEA IS NOT PART OF OR
26ASSOCIATED WITH YOUR HOMEOWNER’S INSURANCE
27COMPANY. IF LOSSES AS A RESULT OF AN EARTHQUAKE
28OR A SERIES OF EARTHQUAKES EXCEED THE
29AVAILABLE RESOURCES OF THE CEA, THIS POLICY IS
30NOT COVERED BY THE CALIFORNIA INSURANCE
31GUARANTY ASSOCIATION. THEREFORE, THE
32CALIFORNIA INSURANCE GUARANTY ASSOCIATION
33WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR
34ASSETS IF THE CEA BECOMES INSOLVENT AND IS
35UNABLE TO MAKE PAYMENTS AS PROMISED. IN
36
ADDITION, YOUR CEA POLICY MAY BE SUBJECT TO
37FUTURE SURCHARGES OF THE POLICY PREMIUM IN
38CERTAIN CASES WHERE AN EARTHQUAKE OR SERIES
39OF EARTHQUAKES HAS EXCEEDED AVAILABLE
40RESOURCES TO PAY CLAIMS. IN THAT CASE, THIS
P4 1MEANS THAT IN ADDITION TO THE ANNUAL PREMIUM,
2YOU MAY BE CHARGED UP TO AN ADDITIONAL 20% OF
3THE PREMIUM.
4(b) (1) If the insurer offers policies providing earthquake
5coverage, other than the coverage specified in subdivisions (a)
6and (b) of Section 10089, pursuant to a rate application approved
7by the commissioner in accordance with subdivision (c) of Section
810089, and an offer of that policy has been accepted, no further
9or other offer of earthquake coverage meeting the minimum
10coverage requirements is required at any renewal if the insurer
11has done both of the following:
12(A) Offered a renewal of that policy.
end insertbegin insert
13(B) Has provided written notice with that renewal regarding
14additional earthquake coverage available.
15(2) The form of the written notice shall be filed with the
16commissioner at least 30 days prior to its first use and shall not
17be used if the commissioner disapproves the form of the written
18notice as being misleading or incomplete within that period.
19(b)
end delete
20begin insert(c)end insert If the offer is not accepted, the insurer or any affiliated
21insurer shall be required on an every other year basis to offer
22earthquake coverage in connection with any continuation, renewal,
23or reinstatement of the policy following any lapse thereof, or with
24respect to any other policy that extends, changes, supersedes, or
25replaces the policy of residential property insurance. The offer
26may be made electronically pursuant to Section 38.5.
27(c)
end delete
28begin insert(d)end insert Nothing in this section shall preclude the named insured
29from terminating the earthquake coverage at any time.
30(d)
end delete
31begin insert(e)end insert This section shall remain in effect only until January 1, 2019,
32and as of that date is repealed, unless a later enacted statute, that
33is enacted before January 1, 2019, deletes or extends that date.
Section 10086 of the Insurance Code, as added by
35Section 15 of Chapter 369 of the Statutes of 2013, is amended to
36read:
(a) If an offer of earthquake coverage is accepted, the
38coverage shall be continued at the applicable rates and conditions
39for the policy term, provided the policy of residential property
40insurance is not terminated by the named insured or insurer.
P5 1(1) At any renewal, an insurer may modify the terms and
2conditions of an existing policy, rider, or endorsement providing
3coverage against loss or damage caused by the peril of earthquake
4if the modified terms and conditions provide the minimum
5coverages required by Section 10089.
6(2) An insurer that modifies the terms and conditions of an
7existing policy, rider, or endorsement shall provide the insured
8with the renewal notice in a stand-alone disclosure
document
9stating the changes in the terms and conditions of the insured’s
10existing policy, rider, or endorsement. Proof of mailing of the
11disclosure document by first-class mail to a named insured at the
12mailing address shown on the policy or application creates a
13conclusive presumption that the disclosure document was provided.
14The disclosure shall include the following statement in 14-point
15boldface type:
16THE COVERAGE IN THE POLICY WE ARE OFFERING
17YOU WITH THIS RENEWAL HAS BEEN REDUCED, AND
18SUBSTANTIALLY DIFFERS FROM THE COVERAGES
19PROVIDED BY YOUR HOMEOWNERS’ POLICY.
20INSURANCE COMPANIES ARE ALLOWED TO RENEW
21EARTHQUAKE INSURANCE POLICIES WITH COVERAGE
22THAT IS REDUCED FROM THE COVERAGE YOU
23PREVIOUSLY PURCHASED. YOU MAY REQUEST A
24SAMPLE COPY OF THIS NEW POLICY TO REVIEW PRIOR
25TO MAKING A DECISION TO ACCEPT THIS RENEWAL,
26AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
27DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE
28COPY SHALL NOT CHANGE OR EXTEND THE POLICY
29EXPIRATION
DATE SPECIFIED IN THE RENEWAL NOTICE.
30A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS
31NOTICE.
32The commissioner shall approve the form of the summary at the
33time he or she approves the policy. The summary shall include the
34information contained in subdivision (a) of Section 10083, and
35may be included with the renewal notice in standard type.
36The commissioner may approve substantially similar disclosure
37forms if necessary to accurately disclose relevant information to
38the policyholder. The commissioner may also approve disclosure
39forms substantially similar to the disclosure statement required by
P6 1Section 10083 if necessary to accurately disclose relevant
2information to the policyholder.
3(3) If the earthquake coverage is provided by a policy issued
4by the California Earthquake Authority, the following disclosure
5shall be provided in 14-point boldface type:
6CALIFORNIA EARTHQUAKE AUTHORITY POLICY
7DISCLOSURE
8THIS POLICY IS BEING PURCHASED FROM THE
9CALIFORNIA EARTHQUAKE AUTHORITY (“CEA”). THE
10COVERAGE IN THIS CEA POLICY SUBSTANTIALLY
11DIFFERS FROM THE COVERAGES PROVIDED IN YOUR
12HOMEOWNER’S POLICY. THE CEA IS NOT PART OF OR
13ASSOCIATED WITH YOUR HOMEOWNER’S INSURANCE
14COMPANY. IF LOSSES AS A RESULT OF AN EARTHQUAKE
15OR A SERIES OF EARTHQUAKES EXCEED THE
16AVAILABLE RESOURCES OF THE CEA, THIS POLICY IS
17NOT COVERED BY THE CALIFORNIA INSURANCE
18GUARANTY ASSOCIATION. THEREFORE, THE
19CALIFORNIA INSURANCE GUARANTY ASSOCIATION
20WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR
21ASSETS IF THE CEA BECOMES INSOLVENT AND IS
22UNABLE TO MAKE PAYMENTS AS PROMISED. IN
23ADDITION, YOUR CEA POLICY MAY BE SUBJECT TO
24FUTURE SURCHARGES OF THE POLICY PREMIUM IN
25CERTAIN CASES WHERE AN EARTHQUAKE OR SERIES
26OF EARTHQUAKES HAS EXCEEDED AVAILABLE
27RESOURCES TO PAY CLAIMS. IN THAT CASE, THIS
28MEANS THAT IN ADDITION TO THE ANNUAL
PREMIUM,
29YOU MAY BE CHARGED UP TO AN ADDITIONAL 20% OF
30THE PREMIUM.
31(b) (1) If the insurer offers policies providing earthquake
32coverage, other than the coverage specified in subdivisions (a)
33and (b) of Section 10089, pursuant to a rate application approved
34by the commissioner in accordance with subdivision (c) of Section
3510089, and an offer of that policy has been accepted, no further
36or other offer of earthquake coverage meeting the minimum
37coverage requirements is required at any renewal if the insurer
38has done both of the following:
39(A) Offered a renewal of that policy.
end insertbegin insert
P7 1(B) Has provided written notice
with that renewal regarding
2additional earthquake coverage available.
3(2) The form of the written notice shall be filed with the
4commissioner at least 30 days prior to its first use and shall not
5be used if the commissioner disapproves the form of the written
6notice as being misleading or incomplete within that period.
7(b)
end delete
8begin insert(c)end insert If the offer is not accepted, the insurer or any affiliated
9insurer shall be required on an every other year basis to offer
10earthquake coverage in connection with any continuation, renewal,
11or reinstatement of the policy following any lapse thereof, or with
12
respect to any other policy that extends, changes, supersedes, or
13replaces the policy of residential property insurance.
14(c)
end delete
15begin insert(d)end insert Nothing in this section shall preclude the named insured
16from terminating the earthquake coverage at any time.
17(d)
end delete18begin insert(e)end insert This section shall become operative on January 1, 2019.
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