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California Wildfires: Commissioner Lara Makes Sereral Requests of Residential Property Insurers

On Friday, October 2, Insurance Commissioner Ricardo Lara of the California Department of Insurance (“Department”) published a Notice addressed to and making several “requests,” detailed below, of both admitted and nonadmitted residential property insurers. We note that the Department repeatedly used the word “request,” rather than “require,” in the Notice.

IN DEPTH


First, residential property insurers are asked to provide relief to policyholders suffering a total loss in the recent California wildfires by waiving the requirement to complete a personal property inventory to collect all or a significant portion of their personal property (or contents) policy coverage limits. The Department has issued similar requests in years past.

The Notice also references two pieces of legislation, Senate Bill 872 and Assembly Bill 3012, signed into law by California Governor Gavin Newsom last week, that provide, among other things, protections for policyholders who suffered a covered total loss resulting from a wildfire state of emergency. Senate Bill 872 imposes certain obligations upon residential property insurers for the payment of additional living expenses, as well as the calculation of replacement cost value in the event of a total loss of an insured structure. Senate Bill 872 also requires insurers to offer a 60-day grace period for payment of premiums for policies on property located within an area defined in a declared state of emergency. Assembly Bill 3012 will require residential property insurers to offer a payment under their contents insurance in an amount no less than 30% of the policy limit applicable to the covered dwelling structure, up to a maximum of USD $250,000, without requiring the policyholder to file an itemized personal property inventory. Although this provision in AB 3012 will not become effective until July 1 of next year, in this Notice the commissioner is requesting that all residential property insurers, at a minimum, offer current wildfire claimants this same option now.

The Commissioner recognized that many residential property insurers have already agreed to the Voluntary and Expedited Claims Handling Procedures that he requested in a Notice issued on August 26, 2020 (which called upon insurers to provide leniency in the form of a 60-day billing grace period, advance payment of at least 4 months’ additional living expenses, initial contents advance payment of at least 25% of policy limits for a total loss and other measures). After applauding those insurers that had provided such relief to policyholders, the commissioner requested that all other insurers provide a similar accommodation or, at a minimum, the amount that will be required to be paid once Assembly Bill 3012 goes into effect. Commissioner Lara noted that this request applies to all policyholder homes that suffered a total loss, unless an insurer has reason to believe a home was not furnished.

The Commissioner’s final request is for all residential property insurers to advise the Department by October 23, 2020, of the following:

  1. Whether they will comply with the requests in this Notice; and

  2. What percentage of total contents coverage they will provide without requiring a detailed personal property inventory.

Responses to this request should be submitted via email to Patrick.Scott@insurance.ca.gov.

© 2020 McDermott Will & EmeryNational Law Review, Volume X, Number 281
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Andrea Best Insurance Regulatory Compliance Attorney McDermott Will Emery Law Firm UK
Partner

Andrea T. Best* advises clients on insurance regulatory compliance throughout the United States. She works with insurers, reinsurers, intermediaries, brokers, trade associations and others in the insurance market.

Andrea actively monitors state insurance-related legislative and regulatory developments and works extensively with London, Bermuda and European insurance market participants regarding non-admitted insurance and reinsurance transactions in the United States, including regulatory advice on structuring insurtech, and on sharing economy and gig economy insurance programs in...

+44 20 7577 6950
Dan Brown Insurance Attorney McDermott Will & Emery San Francisco, CA
Partner

Dan Brown represents insurance companies, start-ups, agents, brokers and other stakeholders in all aspects of the admitted, exempt and surplus lines insurance markets in the United States.

Dan advises alien or foreign insurers on how to comply with various state laws in placing business; early-stage and developed insurtech entities on regulatory and corporate issues; insureds on exempt and specialty lines; producers on licensing, placement and premium tax issues, including digitization of the process; and insureds on coverage and placement issues. He advises London market...

628-218-3820
Thomas M. Dawson Corporate & Insurance Attorney McDermott Will & Emery New York, NY
Partner

Thomas M. Dawson represents US and non-US insurers on regulatory, licensing and corporate matters.

Tom advises industry participants on a wide variety of regulatory and transactional matters, including cybersecurity compliance, insurtech ventures and Holding Company Act filings. He has helped clients form, acquire and invest in US insurers, reinsurers and intermediaries. He counsels non-insurers on advertising, licensing and marketing generally, and provides regulatory compliance advice to service contract issuers and other specialty product providers.

Tom has guided non-US...

212-547-5419
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