If you're a regular reader of the Real Estate Insurance Law Blog, you have probably come across a reference to one of Bill Wilson's most important policy interpretation principles: RTFP! 1 or "Read the full policy." But what happens when you encounter a conflict that is not considered in the policy? Or worse, you are not aware that consumer protection exists that can help manage claims and broaden or clarify coverage?
California has an active legislator who makes an effort to protect policyholders. Unfortunately, too often – and especially after devastating fires – insurance adjusters are sent out of state to deal with claims in California without the proper knowledge or understanding of the California Insurance Code or California Code of Regulations. If you represent policyholders or are yourself, you can not trust the insurance company to adjust to know the rules of the game. It is up to you to be informed about new legislation that may override policy language or extend consumer protection in claims handling. ] In this California miniseries, we will discuss three bills that include insurance coverage protection that every public adjuster, lawyer, or policyholder should be aware that this will take effect in 2021
Assembly Bill number 3012 provides many protections for policyholders, but three are particularly noteworthy. :
1 30% of the content protection without a specified requirement after a loss due to a state of emergency.
California Insurance Code § 10103.7 (b) (1) is amended to read:  “In the event of a covered total loss of a primary residence under a home insurance policy as a result of an emergency permit, as defined in section 8558 of the Government, if the dwelling was furnished at the time of the loss, the insurer shall offer a payment under the content (personal property) coverage in an amount not less than 30 percent of the insurance limit applicable to the covered dwelling structure, up to a maximum two hundred and fifty thousand dollars ($ 250,000), without the insured demanding
Although many insurers have adopted practices to advance content income, and the voluntary reforms of claims management have required insurers to advance 25% of policy limits, there is indeed a difference between May and must. This section is limited to the total losses of the dwelling due to a state of emergency and only to furnished dwellings up to $ 250,000. In order to collect additional benefits that exceed 30% of the insurance limits, the insured must create a content inventory unless their insurance company waives the requirement.
This section enters into force on 1 January 2021.
2. Deduction of land value is prohibited .
In the event of a total loss, California Insurance Code § 2051.5 (c) (1) allows an insured person to carry the benefits they are required to rebuild in a new location or to purchase an already built home elsewhere. . This includes payments for any increased compensation cost and building code coverage that would have been owed based on the home affected by the loss.
Unfortunately, many policyholders who decided to take advantage of this section of code and buy an already built home have encountered an issue that left them less than harmless – some insurers have deducted the value of the new property's land from the insurance benefits owed. This deduction has ranged from tens of thousands of dollars for some and millions for others. Whether insurers can legally make this land deduction for losses before January 1, 2021 is still seemingly unclear.
AB 3012 states that a deduction for the land value is not allowed. California Insurance Code § 2051.5 (c) (2) is amended to read:
Notwithstanding any other law, for a home property insurance policy, the amount of damages is available for a policyholder to use to rebuild or replace the insured home of a. the second place shall be the amount which could have been recovered if the insured dwelling had been rebuilt in its original place, and a deduction of for the value of the land at the new place shall not be allowed from this measure of damage. However, the action for damages may not exceed the cost, including the upgrade cost of the building code and any increased replacement cost to rebuild the insured structure in its original place. (emphasis added)
This section enters into force on 1 January 2021 and is not retroactive to losses that occurred before that date. But while it may not be binding on insurers for losses that occurred before 2021, policyholders may cite it to show the legislator's intent. United policyholders have an article, Buy or Rebuild that describes a handful of arguments as to why insurers should not have deducted land value deductions.
3. Coverage of the civil authority – two weeks extension .
As fires approach communities, evacuation orders are introduced and policyholders are forced to leave their homes. Many policies cover under "Loss of use" if a civil authority prohibits a policyholder from using his home, but often for a maximum of two weeks. In 2020, many communities were forced to evacuate for more than two weeks and were not returned to assess damages.
AB 3012 helps solve the problem by demanding two weeks of extra living costs and additional extensions for good cause. California Insurance Code § 2060 (c) is amended to read:
For a loss that is not otherwise covered by Subsection (b) or (c), in the event of a state of emergency, as defined in section 8558 of the Government Code, which is accompanied of an order from the civil authority restricting access to the home, related to a covered hazard, additional cost of living coverage shall be provided for at least two weeks. Additional extensions of two weeks shall be given to the policyholder for good purposes, but shall be covered by other insurance provisions.
Check out the rest of AB 3012 here. Keep an eye out for the next blog in California on SB 872 and AB 2756.
1 Bill Wilson. When words collide: Resolves insurance coverage and claims disputes . (2018).