California Moratorium on Cancellation and Nonrenewal Due to Wildfire
On Thursday, November 5, the California Department of Insurance (CDI) issued the long-awaited Bulletin 2020-11, implementing the 2020 wildfire season’s targeted moratorium on cancellations and nonrenewals based on wildfire exposure for admitted and nonadmitted residential property insurance policies located in certain ZIP codes affected by wildfire. The Bulletin was amended on November 6 to update the list of affected ZIP Codes.
In August, the CDI warned insurers not to nonrenew or cancel any residential property insurance policies in effect as of August 18 in “any known fire areas in the State” in anticipation of the publication of the ZIP Codes to which the moratorium on cancellation and nonrenewal would apply. California Insurance Code section 675.1, enacted in 2019, provides that when a state of emergency has been declared, insurers may not cancel or nonrenew residential property insurance policies for one year from the declaration of a state of emergency “based solely on the fact that the insured structure is located in an area in which a wildfire has occurred.”
California Governor Gavin Newsom declared a state of emergency on August 18, 2020, and declared three more states of emergency on September 6, 10 and 28. For each state of emergency, the fire perimeter is determined by the California Department of Forestry and Fire Protection in consultation with the California Office of Emergency Services, and the data is provided to the CDI. The CDI then publishes a bulletin (such as Bulletin 2020-11) listing the ZIP Codes to which the moratorium on cancellation and nonrenewal applies, which includes both those ZIP Codes that have suffered wildfire as well as any ZIP Codes adjacent to the fire perimeter. This year’s moratorium covers 477 separate ZIP Codes, some of which fall under multiple states of emergency. The CDI noted that it may issue a supplemental bulletin if additional ZIP Codes are determined to be affected.
The Bulletin orders insurers to rescind any notices of cancellation or nonrenewal that they may have issued covering properties in the affected ZIP Codes during the states of emergency, and to reinstate such policies. We note, however, that this applies only to policies canceled or nonrenewed “based solely on the fact that the insured structure is located in an area in which a wildfire has occurred.”