Annual Notice—Significant California Laws Effective as of the Date of this Notice Pertaining to Residential Property Insurance Policies, including those related to a Declared State of Emergency

RICARDO LARA

CALIFORNIA INSURANCE COMMISSIONER

NOTICE

TO:

All Residential Property Insurance Companies, Licensed Independent

Insurance Adjusters, Insurance Agents/Brokers, and Other Interested Parties

FROM:

Commissioner Ricardo Lara

DATE:

April 2, 2021

RE:

Annual Notice - Significant California Laws Effective as of the Date of this

Notice Pertaining to Residential Property Insurance Policies, including those

related to a Declared State of Emergency

The California Department of Insurance (CDI) is required to prepare and deliver to admitted

insurers and licensed insurance adjusters an annual notice describing the most significant

California laws pertaining to property insurance policies, including those related to a

declared state of emergency. [California Insurance Code (CIC) section 14046(a)(1)] This year’s

annual notice will be available on CDI’s Insurance Adjuster Requirements web page,

in the “Education” section at http://www.insurance.ca.gov/0200-industry/0050-renewlicense/0200-requirements/insurance-adjuster.cfm. CDI may also issue interim updates if

significant changes to the law occur during the course of this year. These updates will also

be available on CDI’s website.

Since at least 2007, after major wildfire events, CDI has distributed notices to insurers,

agents/brokers, and adjusters, regarding significant California laws that pertain to residential

property insurance policies. These notices focus on wildfire claims. This and prior notices can

be found on CDI’s website at: http://www.insurance.ca.gov/01-consumers/140-

catastrophes/WildfireResources.cfm. Consult the notice applicable to the date of the

pertinent fire or other declared emergency to determine which laws were applicable at the

time

California laws that pertain to residential

property insurance policies. These notices focus on wildfire claims. This and prior notices can

be found on CDI’s website at: http://www.insurance.ca.gov/01-consumers/140-

catastrophes/WildfireResources.cfm. Consult the notice applicable to the date of the

pertinent fire or other declared emergency to determine which laws were applicable at the

time.

For claims under a policy of residential property insurance arising as a result of a declared state

of emergency, every residential property insurance company is required to provide the claimant

with a copy of this or the most recent notice no later than 15 calendar days from the date on

which the insurer received notice of the claim. It is expected that all residential property insurers

and insurance adjusters will comply with the following laws for residential property insurance

claims related to a state of emergency.

CALIFORNIA DEPARTMENT OF INSURANCE

PROTECT • PREVENT • PRESERVE

300 Capitol Mall, 17th Floor

Sacramento, California 95814

Tel: (916) 492-3500 • Fax: (916) 445-5280

Page 2

April 2, 2021

SIGNIFICANT CLAIMS AND COVERAGE RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Time Limit to Collect Full

2051.5 (b)(1)

An insured will have no less than 12 months

Replacement Cost

and (2)

(from the date that the first payment toward the

actual cash value is made) to collect the full

replacement cost of the loss, subject to the policy

limit

Page 2

April 2, 2021

SIGNIFICANT CLAIMS AND COVERAGE RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Time Limit to Collect Full

2051.5 (b)(1)

An insured will have no less than 12 months

Replacement Cost

and (2)

(from the date that the first payment toward the

actual cash value is made) to collect the full

replacement cost of the loss, subject to the policy

limit. In the event of a loss relating to a “state of

emergency,” as defined in Government Code

Section 8558, an insured will have no less than

36 months (from the date that the first payment

toward the actual cash value is made) in order to

collect the full replacement cost of the loss,

subject to the policy limit. Additional extensions

of six months shall be provided to policyholders

for good cause.

Rebuilding in Current

Location or Rebuilding or

Replacing in a New

Location

2051.5 (c)(1)

In the event of a total loss of the insured

structure, a policy issued or delivered in this state

shall not contain a provision that limits or denies,

on the basis that the insured has decided to

rebuild at a new location or to purchase an

already built home at a new location, payment of

the building code upgrade cost or the

replacement cost, including any extended

replacement cost coverage, to the extent those

costs are otherwise covered by the terms of the

policy or any policy endorsement. However, the

measure of indemnity shall not exceed the

replacement cost, including the building code

upgrade cost and any extended replacement cost

coverage, if applicable, to repair, rebuild, or

replace the insured structure at its original

location

ny extended

replacement cost coverage, to the extent those

costs are otherwise covered by the terms of the

policy or any policy endorsement. However, the

measure of indemnity shall not exceed the

replacement cost, including the building code

upgrade cost and any extended replacement cost

coverage, if applicable, to repair, rebuild, or

replace the insured structure at its original

location.

Land Value Deduction

2051.5 (c)(2)

For a residential property insurance policy, the

measure of damages available to a policyholder

to use to rebuild or replace the insured home at

another location shall be the amount that would

have been recoverable had the insured dwelling

been rebuilt at its original location, and a

deduction for the value of land at the new

location shall not be permitted from that measure

of damages. However, the measure of indemnity

shall not exceed the cost, including the building

code upgrade cost and any extended

replacement cost coverage, if applicable, to

rebuild the insured structure at its original

location.

Page 3

April 2, 2021

SIGNIFICANT CLAIMS AND COVERAGE RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

List of Items Covered ­

§2060 (a)

If requested by the insured, CIC section 2060(a)

Additional Living

requires insurance companies to provide the

Expenses (ALE)

insured with a list of items that an insurer

believes would be covered under the policy.

Time Limit to Collect

2060 (b)(1)

In the event of a covered loss relating to a state

Additional Living

of emergency, as defined in Government Code

Expenses (ALE)

Section 8558, on and after July 1, 2021,

coverage for additional living expenses (or loss

of use) shall be for at least 24 months from the

inception of the loss, but shall be subject to

other policy provisions

under the policy.

Time Limit to Collect

2060 (b)(1)

In the event of a covered loss relating to a state

Additional Living

of emergency, as defined in Government Code

Expenses (ALE)

Section 8558, on and after July 1, 2021,

coverage for additional living expenses (or loss

of use) shall be for at least 24 months from the

inception of the loss, but shall be subject to

other policy provisions. An insurer shall grant an

extension of up to 12 additional months, for a

total of 36 months, if an insured acting in good

faith and with reasonable diligence encounters a

delay or delays in the reconstruction process

that are the result of circumstances beyond the

control of the insured. Circumstances beyond

the control of the insured include, but are not

limited to, unavoidable construction permit

delays, lack of necessary construction materials,

and lack of available contractors to perform the

necessary work. Additional extensions of six

months shall be provided to policyholders for

good cause.

Uninhabitable/Reasonable

Habitation (ALE)

2060 (b)(2)

If the insured home is rendered uninhabitable by

a covered peril, on and after July 1, 2021, a

policy that provides coverage for additional

living expenses shall not limit the policyholder’s

right to recovery. However, an insurer may, in

lieu of making living expense payments required

by this subdivision, provide a reasonable

alternative remedy that addresses the property

condition that precludes reasonable habitation

of the insured premises. The additional living

expense coverage subject to this section does

not include a utility public safety power shut off

event, which is the deenergization of a portion of

the electrical distribution or transmission system

to reduce the risk of wildfire ignition.

reasonable

alternative remedy that addresses the property

condition that precludes reasonable habitation

of the insured premises. The additional living

expense coverage subject to this section does

not include a utility public safety power shut off

event, which is the deenergization of a portion of

the electrical distribution or transmission system

to reduce the risk of wildfire ignition.

Page 4

April 2, 2021

SIGNIFICANT CLAIMS AND COVERAGE RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Restricted Access by

2060 (c)

In the event of a state of emergency, as defined

Civil Authority (ALE)

in Government Code Section 8558, for a loss

that is otherwise not subject to CIC section 2060

(b)(1) and (2) above, that is accompanied by an

order of civil authority restricting access to the

home, related to a covered peril, on and after

July 1, 2021, additional living expense coverage

shall be provided for at least two weeks.

Additional extensions of two weeks shall be

provided to a policyholder for good cause, but

shall be subject to other policy provisions.

Advance Payment and

Itemization of Contents

(ALE)

2061(a)

In the event of a covered loss relating to a state

of emergency, as defined in Government Code

Section 8558, the following special provisions

shall apply under a residential property

insurance policy:

onal extensions of two weeks shall be

provided to a policyholder for good cause, but

shall be subject to other policy provisions.

Advance Payment and

Itemization of Contents

(ALE)

2061(a)

In the event of a covered loss relating to a state

of emergency, as defined in Government Code

Section 8558, the following special provisions

shall apply under a residential property

insurance policy:

(1) If an insured has made a claim for additional

living expenses related to a total loss, an insurer

shall, upon request by an insured, render an

advance payment of no less than four months of

living expenses. Additional payment for

additional living expenses shall be payable upon

proper proof following the advance period.

(2) If an insured has made a claim for contents

related to a total loss of a primary residence, an

insurer shall not require that the insured use a

company-specific inventory form if the insured

can provide an inventory using a form that

contains substantially the same information.

This subdivision does not limit the authority of

an insurer to seek additional reasonable

information from an insured upon receipt of an

inventory form submitted by an insured.

(3) If an insured has made a claim for contents

related to a total loss of a primary residence, an

insurer shall accept an inventory that includes

groupings of categories of personal property,

including clothing, shoes, books, food items,

CDs, DVDs, or other categories of items for

which it would be impractical to separately list

each individual item claimed.

form submitted by an insured.

(3) If an insured has made a claim for contents

related to a total loss of a primary residence, an

insurer shall accept an inventory that includes

groupings of categories of personal property,

including clothing, shoes, books, food items,

CDs, DVDs, or other categories of items for

which it would be impractical to separately list

each individual item claimed.

Page 5

April 2, 2021

SIGNIFICANT CLAIMS AND COVERAGE RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Changing Claims

2071 and

If, within a six-month period, an insurer assigns

Adjusters

14047

a third or subsequent adjuster to be primarily

responsible for a claim, the insurer shall

provide the insured with a written status report.

The written status report must include a

summary of any decisions or actions that are

substantially related to the disposition of a

claim, including, but not limited to, the amount

of losses to structures or contents, the retention

or consultation of design or construction

professionals, the amount of coverage for

losses to structures or contents and all items of

dispute.

Note: In addition to the above, CIC section

14047 requires that for a claim arising from a

state of emergency, if, within a six-month

period, an insurer assigns a third or

subsequent first-party real or personal property

claims adjuster, the insurer shall establish a

primary point of contact for the insured and

provide the insured one or more direct means

of communication with the primary point of

contact.

Appraisal

2071

In the event of a government-declared disaster,

as defined in the Government Code, appraisal

may be requested by either the insured or the

insurance company but shall not be compelled

y

claims adjuster, the insurer shall establish a

primary point of contact for the insured and

provide the insured one or more direct means

of communication with the primary point of

contact.

Appraisal

2071

In the event of a government-declared disaster,

as defined in the Government Code, appraisal

may be requested by either the insured or the

insurance company but shall not be compelled.

Suits

2071

No suit or action on a policy including this term

for the recovery of any claim shall be

sustainable in any court of law or equity unless

all the requirements of the policy shall have

been complied with, and unless commenced

within 12 months next after inception of the

loss. If the loss is related to a state of

emergency, the time limit to bring suit is

extended to 24 months after inception of the

loss.

Copy of Complete Policy

After a Loss

2084

After a covered loss under a policy covered by

Section 2071, an insurer shall provide to the

insured, free of charge, a complete, current

copy of his or her policy within 30 calendar

days of receipt of a request from the insured.

The policy must include the full insurance

policy, any endorsements, and the declarations

page.

Page 6

April 2, 2021

SIGNIFICANT CLAIMS AND COVERAGE RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Ability to Combine

Coverages

10103.7(a)

In the event of a claim relating to a state of

emergency, an insured under a residential

property insurance policy shall be permitted to

combine payments for claims for losses up to

the policy limits for the primary dwelling and

other structures, for any of the covered

expenses reasonably necessary to rebuild or

replace the damaged or destroyed dwelling, if

the policy limits for coverage to rebuild or

replace the primary dwelling are insufficient

an insured under a residential

property insurance policy shall be permitted to

combine payments for claims for losses up to

the policy limits for the primary dwelling and

other structures, for any of the covered

expenses reasonably necessary to rebuild or

replace the damaged or destroyed dwelling, if

the policy limits for coverage to rebuild or

replace the primary dwelling are insufficient.

SIGNIFICANT UNDERWRITING RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Adjustment of Policy

675.1(a)(1)

If reconstruction of the primary insured

Limits on Renewal

structure has not been completed by the time

of policy renewal, the insurer, prior to or at the

time of renewal, and after consultation by the

insurer or its representative with the insured as

to what limits and coverages might or might not

be needed, shall adjust the limits and

coverages, write an additional policy, or attach

an endorsement to the policy that reflects the

change, if any, in the insured’s exposure to

loss. The insurer shall adjust the premium

charged to reflect any change in coverage.

Cancellation after Total

675.1(a)(2)

The insurer shall not cancel coverage while the

Loss to Primary Structure

primary insured structure is being rebuilt,

except for the reasons specified in subdivisions

(a) to (e), inclusive, of Section 676. The insurer

shall not use the fact that the primary insured

structure is in damaged condition as a result of

the total loss as the sole basis for a decision to

cancel the policy pursuant to subdivision (e) of

that section.

while the

Loss to Primary Structure

primary insured structure is being rebuilt,

except for the reasons specified in subdivisions

(a) to (e), inclusive, of Section 676. The insurer

shall not use the fact that the primary insured

structure is in damaged condition as a result of

the total loss as the sole basis for a decision to

cancel the policy pursuant to subdivision (e) of

that section.

Page 7

April 2, 2021

SIGNIFICANT UNDERWRITING RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Non-Renewal After a

675.1(a)(3)

The insurer shall offer to, for at least the next

Declared Disaster

two annual renewal periods, but no less than

24 months of coverage from the date of the

loss, renew the policy in accordance with

Section 675.1(a)(1) if the total loss to the

primary insured structure was caused by a

disaster, as defined in subdivision (b) of

Section 1689.14 of the Civil Code, the loss was

not also due to the negligence of the insured,

and losses have not occurred subsequent to

the disaster-related total loss that relate to

physical or risk changes to the insured property

that result in the property becoming

uninsurable.

Non-Renewal or

Cancellation within Fire

Perimeter

675.1(b)(1)

An insurer shall not cancel or refuse to renew a

policy of residential property insurance for a

property located in any ZIP Code within or

adjacent to the fire perimeter, for one year after

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. This prohibition applies to all policies

of residential property insurance in effect at the

time of the declared state of emergency

y insurance for a

property located in any ZIP Code within or

adjacent to the fire perimeter, for one year after

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. This prohibition applies to all policies

of residential property insurance in effect at the

time of the declared state of emergency.

Reduction of Limits or

678 (a) and (c)

An insurer shall deliver to the insured either (1)

Elimination of Coverage

an offer of renewal of the policy 45 days before

the policy expiration contingent upon payment

of premium as stated in the offer, and which

states any reduction of limits or elimination of

coverage or (2) a notice of nonrenewal 75 days

prior to the expiration that states the reason or

reasons for the nonrenewal.

For the offer of renewal, the insurer shall

identify any reduction of limits or elimination of

coverage. The elimination of coverage for the

previously covered peril of fire shall be subject

to subdivision (b) of Section 10103.6.

Page 8

April 2, 2021

SIGNIFICANT UNDERWRITING RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Reduction of Limits or

Elimination of Coverage

~ Continued ~

678 (a) and (c)

If an insurer fails to give the named insured a

notice of nonrenewal at least 75 days before

the policy expiration, the existing policy, with no

change in its terms and conditions, shall remain

in e

Page 8

April 2, 2021

SIGNIFICANT UNDERWRITING RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Reduction of Limits or

Elimination of Coverage

~ Continued ~

678 (a) and (c)

If an insurer fails to give the named insured a

notice of nonrenewal at least 75 days before

the policy expiration, the existing policy, with no

change in its terms and conditions, shall remain

in effect for 75 days from the date that the

notice of nonrenewal is delivered or mailed to

the named insured. A notice to this effect shall

be provided by the insurer to the named

insured with the notice of nonrenewal.

Notice of Nonrenewal for

Residential Property

Policy

678 (e)

Insurers shall accompany a notice of

nonrenewal for a residential property insurance

policy expiring on or after July 1, 2021, with a

notice substantially similar to the notice stated

in this section. The notice in this section refers

insureds to CDI’s California Home Insurance

Finder and the California FAIR Plan to assist

the insured to locate an agent, broker, or

insurance company by zip code and the

languages in which the agent, broker,

insurance company sells insurance.

Grace Period for

2062

In the event of a state of emergency, as

Payments

defined in Government Code Section 8558, an

insurer shall offer a 60-day grace period for

payment of premiums for residential property

insurance policies covering a property located

within the affected area defined in the state of

emergency for a period of 60 days after the

emergency. This does not require any change

to insurer billing practices regarding billing,

automatic payment, or cancellation for

nonpayment if the insurer reinstates, without a

lapse in coverage or late fees, any policy

subject to this section that was canceled for

nonpayment of premiums, if requested by the

insured and upon reasonably timely payment of

all premiums due.

days after the

emergency. This does not require any change

to insurer billing practices regarding billing,

automatic payment, or cancellation for

nonpayment if the insurer reinstates, without a

lapse in coverage or late fees, any policy

subject to this section that was canceled for

nonpayment of premiums, if requested by the

insured and upon reasonably timely payment of

all premiums due.

Page 9

April 2, 2021

SIGNIFICANT UNDERWRITING RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Policy Coverage – Peril of

Fire

10103.6

If an insurer issues a new residential property

insurance policy on or after July 1, 2021, that

does not provide coverage for the peril of fire,

the insurer shall, on or before the date of

issuance of the policy, obtain a signed

acknowledgment from the applicant or insured

stating that the newly issued policy does not

provide coverage for the peril of fire. If the

applicant or insured does not sign the required

acknowledgment on or before the issuance of

the policy, the insurer shall obtain the signed

acknowledgment from the applicant or insured

within 60 days of the date of issuance of the

policy. For purposes of this subdivision, a new

or newly issued policy does not include renewal

of an existing policy, including a renewal that

contains different terms than the preceding

policy periods

uired

acknowledgment on or before the issuance of

the policy, the insurer shall obtain the signed

acknowledgment from the applicant or insured

within 60 days of the date of issuance of the

policy. For purposes of this subdivision, a new

or newly issued policy does not include renewal

of an existing policy, including a renewal that

contains different terms than the preceding

policy periods.

If an insurer issues or renews a residential

property insurance policy on or after

July 1, 2021, that does not provide coverage

for the peril of fire, the insurer shall prominently

disclose both of the following on the

declarations page of the policy:

(1) The following statement in bold, uppercase

letters in no less than 12-point type:

THIS POLICY DOES NOT COVER THE

PERIL OF FIRE. THERE ARE OTHER

RESOURCES FOR FINDING FIRE

COVERAGE, INCLUDING USING THE

CALIFORNIA DEPARTMENT OF

INSURANCE’S HOME INSURANCE

FINDER OR PURCHASING COVERAGE

FROM THE CALIFORNIA FAIR PLAN

ASSOCIATION.

(2) Information on the California FAIR Plan, as

required by subdivision (h) of Section 10095,

and information on the California Home

Insurance Finder, as required by subdivision

(b) of Section 10095.7.

Page 10

April 2, 2021

SIGNIFICANT UNDERWRITING RELATED LAWS

ISSUE

INSURANCE

CODE

SECTION

SUMMARY

Payment of Contents

10103.7(b)

In the event of a covered total loss of a primary

Without Inventory

dwelling under a residential property insurance

policy resulting from a state of emergency, if

the residence was furnished at the time of the

loss, (1) the insurer shall offer a payment under

the contents (personal property) coverage in an

amount no less than 30 percent of the policy

limit applicable to the covered dwelling

structure, up to a maximum of two hundred fifty

thousand dollars ($250,000), without requiring

the insured to file an itemized claim.

m a state of emergency, if

the residence was furnished at the time of the

loss, (1) the insurer shall offer a payment under

the contents (personal property) coverage in an

amount no less than 30 percent of the policy

limit applicable to the covered dwelling

structure, up to a maximum of two hundred fifty

thousand dollars ($250,000), without requiring

the insured to file an itemized claim.

(2) After receiving the payment described in

paragraph (1), the insured may recover

additional amounts up to the policy limit for

contents coverage by filing a claim pursuant to

the terms of the policy for the loss of contents

that exceeds the value of the payment provided

pursuant to paragraph (1).

(3) When an insured files a claim relating to a

state of emergency, as defined in Government

Code Section 8558, the insurer shall notify the

insured of the option to receive payment for

loss of contents pursuant to paragraph (1) and

of the insured’s option to subsequently file a full

itemized claim pursuant to paragraph (2).

(4) This subdivision does not affect payment

under the policy for scheduled personal

property.

(5) This section does not prohibit an insurer

from restricting payment in cases of suspected

fraud.

Note: The above laws are the most significant laws pertaining to property insurance policies,

including those related to a declared state of emergency. In addition, all insurers and claims

adjusters, whether California-licensed or not, must be properly trained on the California Unfair

Insurance Practices Act (Cal. Ins. Code Sections 790 - 790.15), Fair Claims Settlement

Practices Regulations (Title 10, California Code of Regulations, Sections 2695.1 – 2695.12),

Insurance Mediation laws (Cal. Ins. Code Sections 10089.70 – 10089.83) and all other laws

relating to property and casualty insurance claims handling, coverage, and eligibility.

Disclaimer: The above laws are significant laws effective as of the date of this notice

790 - 790.15), Fair Claims Settlement

Practices Regulations (Title 10, California Code of Regulations, Sections 2695.1 – 2695.12),

Insurance Mediation laws (Cal. Ins. Code Sections 10089.70 – 10089.83) and all other laws

relating to property and casualty insurance claims handling, coverage, and eligibility.

Disclaimer: The above laws are significant laws effective as of the date of this notice. Some of

the above laws may not pertain to prior disaster claims.