To conclude our discussion of relevant updates to California law in 2021, this post highlights Assembly Bill 2756. (If you missed it, check out our previous blog posts on Senate Bill 872 and Assembly Bill 3012.)
Thanks and Disclosures  Recently, Daniel Veroff published a blog entitled Negligence from captured agents is increasing because they do not understand the justice plan in California but now convey it by truck . I highly recommend that you read it – and I do not say that just because he is my boss. In his post, he points out that some large insurance companies "sell their regular homeowners with a twist – except for fire losses." As Dan points out, we have unfortunately seen errors in obtaining correct and adequate coverage, even from agents, and many homeowners do not become aware that there is a potential coverage gap until it is too late. The result is that homeowners are left underinsured by hundreds of thousands of dollars in the middle of the annual, record-breaking fires.
Assembly Bill 2756 aims to shrink the information gap that exists between sellers and buyers of insurance. It requires the insurer to receive a signed confirmation from an applicant or insured if the insurer issues insurance for residential properties on July 1
THIS POLICY DOES NOT COVER THE FIRE PERILE. THERE ARE OTHER RESOURCES TO FIND FIRE COVERAGE, INCLUDING USING CALIFORNIA DEPARTMENT OF INSURANCE HOME INSURANCE FINDER OR PURCHASING COVERAGE FROM CALIFORNIA FAIR PLAN AS FAIR PLAN ASIAN FAIR PLAN. identify the specific limits that are reduced or eliminated.
Mandatory code upgrade coverage
Ordinary homeowners' policy language provides an insured right to money that corresponds to the cost of restoring a home to its loss ratio, but may exclude the cost of legally necessary improvements for the property to comply with applicable building regulations. Building codes contain guidelines aimed at protecting safety and public welfare in connection with the construction and occupancy of the home. Building codes are constantly updated and published at the federal, state and local levels. For example, new editions of the California Building Standards Code (CBSC) are published every three years.
The cost of complying with building codes is called "code upgrades" and is often significant. Common items that require upgrades after loss include foundations and structural elements, insulation, wiring or energy efficient windows, to name a few. While code upgrade coverage is often added to homeowners, usually through approval, it has not previously been a necessary coverage. This in turn has created a coverage gap for some unsuspecting policyholders who usually just learn that they do not have this coverage after a loss has occurred, making them underinsured.
Assembly Bill 2756 now requires a minimum of an additional 10% code upgrade coverage for an open home insurance policy issued or renewed after July 21, 2021. California Insurance Code § 10103 (c) has been amended to read as follows: :
An open insurance for residential property insurance that provides compensation cost coverage shall not be issued or renewed unless it provides additional building code upgrade coverage of not less than 10 percent of the housing boundaries. The building code upgrade required by this subdivision shall be additional coverage, and the use of this coverage shall not reduce or empty the residential boundaries of the insured property. This subdivision does not prohibit an insurer from offering a building code upgrade of more than 10 percent of the home's coverage policy limits, except to provide a minimum coverage of 10 percent of the home's coverage policy limits.
The proposal further requires an insurance for residential properties that provides compensation costs to include information related to the coverage on the declaration page. For home insurance that does not require and does not include upgrading the building code, it must be noted on the declaration page instead.