2024 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

CALIFORNIA DEPARTMENT OF INSURANCE

PROTECT • PREVENT • PRESERVE

300 Capitol Mall, 17

Floor

Sacramento, California 95814

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

RE: 2024 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

TO: All Residential Property Insurance Companies, Licensed Independent

Insurance Adjusters, Insurance Agents/Brokers, and Other Interested

Parties

FROM: Insurance Commissioner Ricardo Lara

DATE: January 5, 2024

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 [Cal. Ins. Code]

section 14046[a][1]). The 2024 annual notice is available in the “Education” section of

CDI’s Insurance Adjuster Requirements web page. 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 and can be

found on CDI’s Wildfire Resources webpage.

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 (Cal. Ins. Code

section 14046[b]).

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Important Note: Consult the notice applicable to the date of the pertinent fire or other

declared emergency to determine which laws were applicable at the time of the loss. This

notice provides links to each section of the California Insurance Code summarized below.

For additional information, please review the text of the applicable section of the California

Insurance Code.

SIGNIFICANT CLAIMS AND COVERAGE RELATED LAWS

Actual Cash Value Calculation

Under an open policy, the measure of indemnity in fire insurance is the expense to the

insured of replacing the thing lost or injured in its condition at the time of the injury, the

expense being computed as of the time of the commencement of the fire.

Under an open policy that requires payment of actual cash value, the measure of the

actual cash value recovery, in whole or partial settlement of the claim, for either a total or

partial loss to the structure or its contents, shall be the amount it would cost the insured

to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deduction

for physical depreciation based upon its condition at the time of the injury or the policy

limit, whichever is less. A deduction for physical depreciation shall apply only to

components of a structure that are normally subject to repair and replacement during the

useful life of that structure (Cal. Ins. Code section 2051).

Replacement Cost Value Calculation

Under an open policy that requires payment of the replacement cost for a loss, the

measure of indemnity is the amount that it would cost the insured to repair, rebuild, or

replace the thing lost or injured, without a deduction for physical depreciation, or the policy

limit, whichever is less (Cal. Ins. Code section 2051.5[a]).

Time Limit to Collect Full Replacement Cost

An insured will have no less than 12 months (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

California Government Code (Gov. 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 (Cal. Ins. Code

sections 2051.5[b][1] and [2]).

Rebuilding in Current Location or Rebuilding or Replacing in a New Location

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

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extended replacement cost coverage, if applicable, to repair, rebuild, or replace the

insured structure at its original location (Cal. Ins. Code

Land Value Deduction

For a residential property insurance policy, th

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 (Cal.

Ins. Code section 2051.5[c][2]).

e measure of damages available to a

List of Items Covered – Additional Living Expenses (ALE)

If requested by the insured, this section requires insurance companies to provide the

insured with a list of items that an insurer believes would be covered under the policy

(Cal. Ins. Code section 2060[a]).

section 2051.5[c][1]).

Time Limit to Collect Additional Living Expenses (ALE)

In the event of a covered loss relating to a state of emergency, as defined in Gov. Code

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 (Cal. Ins. Code section 2060[b][1]).

Uninhabitable/Reasonable Habitation (ALE)

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 de-energization of a portion of the

electrical distribution or transmission system to reduce the risk of wildfire ignition (Cal.

Ins. Code section 2060[b][2]).

Restricted Access by Civil Authority (ALE)

In the event of a state of emergency, as defined in Gov. Code section 8558, for a loss

that is otherwise not subject to Cal. Ins. Code sections 2060 (b)(1) and (2) above that is

accompanied by an order of civil authority restricting access to the home, related to a

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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 (Cal. Ins.

Code section 2060[c]).

Additional Living Expense (ALE) Advance Payment

In the event of a covered loss relating to a state of emergency, as defined in Gov. Code

section 8558, the following special provision 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 (Cal.

Ins. Code section 2061[a]).

Itemization of Contents

In the event of a covered loss relating to a state of emergency, as defined in Gov. Code

section 8558, the following special provisions shall apply under a residential property

insurance policy:

(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 (Cal. Ins. Code section 2061[a]).

Changing Claims Adjusters

If, within a six-month period, an insurer assigns 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 (Cal. Ins. Code section 2071).

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Note: In addition to the above, Cal. Ins. Code 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 (Cal. Ins. Code section

14047).

Appraisal

In the event of a government-declared disaster, as defined in the California Government

Code, appraisal may be requested by either the insured or the insurance company but

shall not be compelled (Cal. Ins. Code section 2071).

Copy of Complete Policy After a Loss

After a covered loss under a policy covered by Cal. Ins. Code section 2071, an insurer

shall provide to the insured, free of charge, a complete, current copy of their 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 (Cal. Ins. Code section

2084).

Building Cost Upgrade Coverage

An open policy of residential property insurance that provides replacement cost coverage

shall not be issued or renewed unless it provides additional building code upgrade

coverage of no less than 10 percent of the dwelling coverage policy limits. The building

code upgrade coverage required by this subdivision shall be additional coverage, and use

of this coverage shall not reduce or deplete the dwelling coverage policy limits for the

insured property. Insurers may defer building code upgrade coverage of greater than 10

percent of the dwelling coverage policy limits, in addition to providing the minimum

coverage of 10 percent of the dwelling coverage policy limits (Cal. Ins. Code section

10103[c]).

Ability to Combine Coverages

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

(Cal. Ins. Code section 10103.7[a]).

Payment of Contents Without Inventory

In the event of a covered total loss of a primary 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

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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

Gov. 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 (Cal. Ins. Code section 10103.7[b]).

SIGNIFICANT RATING AND UNDERWRITING RELATED LAWS

Mitigation in Rating Plans and Wildfire Risk Models

Wildfire Risk Model or Rating Factor

California Code of Regulations, Title 10, section 2644.9, subdivision (h) states, Provision

of wildfire risk score or other wildfire risk classification to policyholder or applicant.

An insurer utilizing a Wildfire Risk Model, or rating factor, to segment, create a rate

differential, or surcharge the premium based upon the policyholder or applicant's wildfire

risk shall, within one hundred eighty (180) days after the date this section is filed with the

Secretary of State, implement a written procedure to provide, in writing, to each such

policyholder or applicant for property insurance the wildfire risk score or other wildfire risk

classification used by the insurer to segment, create a rate differential, or surcharge the

premium based upon the policyholder or applicant's wildfire risk. The insurer shall provide

to the policyholder or applicant such wildfire risk score or classification at the following

times:

(1) No later than fifteen (15) days following the submission to the insurer of the

applicant's completed application;

(2) At least forty-five (45) days prior to each renewal;

(3) At least seventy-five (75) days prior to any nonrenewal; and

(4) In the event that the policyholder or applicant has completed a mitigation

measure on the subject property since the time of the last application to or renewal

by the insurer, no later than thirty (30) days following the submission to the insurer

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of the policyholder or applicant's request that the insurer provide a revised wildfire

risk score or wildfire risk classification.

Subdivision (i) Policyholder or applicant's right to appeal.

The procedure described in subdivision (h) of this section shall permit a policyholder

under, or applicant for, a policy of property insurance who disagrees with the assignment

of the wildfire risk score, or other wildfire risk classification, provided to the policyholder

or applicant pursuant to that subdivision the right to appeal orally or in writing that

assignment directly to the insurer. The insurer shall notify the policyholder or applicant in

writing of this right to appeal the wildfire risk score or other wildfire risk classification

whenever such score or classification is provided to the policyholder or applicant as set

forth in subdivision (h) of this section. If the policyholder or applicant appeals the wildfire

risk score or other wildfire risk classification, the insurer shall acknowledge receipt of the

appeal in writing within ten (10) calendar days of receipt of the appeal. The insurer shall

respond to the appeal in writing with a reconsideration and decision within thirty (30)

calendar days after receiving the appeal. In the event that an appeal is denied, the insurer

shall, upon request by the Department, forward a copy of the appeal, and the insurer's

response, to the Department.

Subdivision (j) Representation by broker or agent.

If the policyholder or applicant is represented by a broker, or the insurer is represented

by an insurance agent with respect to the policyholder's policy or the applicant's

application, the policyholder or applicant may appeal orally or in writing to the agent or

broker the assignment of wildfire risk score or other wildfire risk classification, who shall

then forward that appeal to the insurer no later than five (5) calendar days after receiving

the appeal from the policyholder or applicant. The insurer shall acknowledge receipt of

the appeal in writing to the policyholder or applicant and the agent or broker no later than

five (5) calendar days after receipt of the appeal from the broker or agent. The insurer

shall respond to the appeal to the policyholder or applicant and the agent or broker with

a written reconsideration and decision of the appeal within thirty (30) calendar days after

receiving the appeal from the broker or agent. In the event that an appeal is denied, the

insurer shall, upon request by the Department, forward a copy of the appeal, and the

insurer's response, to the Department.

Subdivision (k) Explanation of wildfire risk score or other wildfire risk classification.

Whenever a wildfire risk score, or other wildfire risk classification used by the insurer to

segment, create a risk differential or surcharge the premium for a particular policyholder

or applicant, is identified or provided to the policyholder or applicant pursuant to

subdivision (h) of this section, the insurer shall also provide in writing:

(1) The range of such scores or classifications that could possibly be assigned to any

policyholder or applicant;

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(2) The relative position of the score or classification assigned to the policyholder or

applicant in question within that range of possible scores or classifications, and the impact

of the score or classification on the rate or premium; and

(3) A detailed written explanation of why the policyholder or applicant received the

assigned score or classification; the explanation shall make specific reference to the

features of the property in question that influenced the assignment of the score or

classification.

The insurer shall provide, in addition, the following information:

(A) Which mitigation measure or measures can be taken by the policyholder or applicant

to lower the wildfire risk score or classification; and

(B) The amount of premium reduction the policyholder or applicant would realize as a

result of performing each such measure under the insurer's rating plan that is in effect at

the time.

Subdivision (l) Notification to policyholder or applicant of right to contact Department in

connection with insurer's response to appeal.

When an insurer responds to the applicant or policyholder in connection with an appeal

pursuant to subdivision (i) or (j) of this section, it shall also notify the policyholder or

applicant in writing that the policyholder or applicant may contact the Department of

Insurance for assistance if the policyholder or applicant disagrees with the insurer's

written reconsideration and decision. In any event, the insurer shall provide the

policyholder or applicant with the Department of Insurance toll-free consumer hotline and

web address of the Department's Consumer Complaint Center (California Code of

Regulations, Title 10, sections 2644.9[h], [i], [j], [k], and [l]).

Adjustment of Policy Limits on Renewal

If reconstruction of the primary insured 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 (Cal. Ins. Code section 675.1[a][1]).

Cancellation After Total Loss to Primary Structure

The insurer shall not cancel coverage while the primary insured structure is being rebuilt,

except for the reasons specified in subdivisions (a) through (e), inclusive, of Cal. Ins.

Code 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 (Cal. Ins. Code section 675.1[a][2]).

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Non-Renewal After a Declared Disaster

The insurer shall offer to, for at least the next two annual renewal periods, but no less

than 24 months of coverage from the date of the loss, renew the policy in accordance

with Cal. Ins. Code 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 California Civil Code section

1689.14, 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 (Cal.

Ins. Code section 675.1[a][3]].

Non-Renewal or Cancellation Within Fire Perimeter

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 (Cal. Ins. Code section 675.1[b][1]).

Reduction of Limits or Elimination of Coverage

An insurer shall deliver to the insured either (1) 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 Cal. Ins. Code section 10103.6.

Alignment of Notice of Nonrenewal of Residential Property Policy

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.

On and after July 1, 2022, insurer mailing timelines are to be aligned for both cancellation

and non-renewal notices for homeowners' and workers' compensation insurance policies

to ensure they receive extra mail time-delay-days so consumers have a better chance to

retrieve these documents on time (Cal. Ins. Code sections 678[a] and [c]).

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Notice of Nonrenewal for Residential Property Policy

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,

or insurance company sells insurance (Cal. Ins. Code section 678[e]).

Grace Period for Payments

In the event of a state of emergency, as defined in Gov. 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 (Cal. Ins. Code

section 2062).

Policy Coverage – Peril of Fire

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.

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.

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(2) Information on the California FAIR Plan, as required by subdivision (h) of Cal. Ins.

Code section 10095, and information on the California Home Insurance Finder, as

required by subdivision (b) of Cal. Ins. Code section 10095.7 (Cal. Ins. Code section

10103.6).

_________________________________

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 through 790.15),

Fair Claims Settlement Practices Regulations (Cal. Code of Regs, Title.10, sections

2695.1 through 2695.12), Insurance Mediation laws (Cal. Ins. Code sections 10089.70

through 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.