Last week I blogged about how the California Department of Insurance issued a one-year moratorium on insurance companies to stop their practice of not renewing and terminating homeowners' insurance coverage for policyholders living near major forest fires. 1 But what if your carrier sent you a cancellation just before the moratorium — does the moratorium apply retroactively to restore your coverage?
Probably not, but a new 7-0 ruling by the California Supreme Court gives hope for future changes to the state's already existing assumption that laws are not retroactive when it comes to insurance. It may also set a trend for retroactive application of certain statutory changes, even if the provisions are contradicted by older policy languages. In McHugh et al. v. Protective Life Insurance Company 2 the court held that new laws extending period periods and changing termination requirements apply to a life insurance even regardless of when the insurances were originally issued or if these statues were contradicted by the policy.
In McHugh life insurance holder William McHugh had a $ 1
On January 1, 2013, however, California law was amended and invoked a new time limit (Insurance Code §10113.71 and §10113.72), which requires life insurance to prescribe a time limit of 60 days. The statutes also contain important notification requirements for carriers to follow before cancellation. The purpose of these changes was to prevent policyholders, especially the elderly and hospitalized, from losing coverage because they have not paid, especially on insurance policies for which they have paid premiums correctly for many years.
Before McHugh missed his January 9, 2013, payment, Protective Life sent him a warning letter in December 2012. He did not refund the payment even though Protective Life sent him a new letter on January 29, telling him about the insured fee period. When the payment was not made, Protective Life sent him a letter on 18 February stating that the policy had expired but could be reinstated with payment by 12 March. McHugh still did not pay, and his policy ceased. After he passed away a few months later, his wife sought status on the policy from Protective Life and was told that it was terminated. She sued, along with McHugh's daughter, and argued for the new January 1, 2013, laws should apply. Both the trial court and the lower court ruled against the family and ruled that the new laws did not apply, but the California Supreme Court reversed and ruled that the new rules applied to the policy. It is important to note that the Supreme Court did not address whether the plaintiffs had the right to reclaim the insurance benefits, but instead returned the case to the district court for a jury to determine whether Protective Life complied
in their consent decision, the judges noted that retroactive application of California State laws can be a trend if they come up in court again. This would be a major change for the benefit of policyholders in California, especially victims of forest fires (or other governments that have declared disasters). For example, section 2060 (b) (1) of the California Insurance Code entered into force on January 1, 2021. This section requires insurers to provide coverage for at least 36 months of extra cost of living (ALE) due to a covered loss for state of emergency – almost any massive wildfire. The old rule considered that only 24 months were required but was changed due to extended construction periods. If you were hit by a wildfire in December 2020, you would only be entitled to 24 months of ALE, but January 2021 victims of fire would get at least 36 months under the new rule.
Another example of retroactive application that would benefit policyholders claiming wildfire in 2020 was the recent amendment to California Insurance Code § 10103.7 (b) (1). This rule was amended to require carriers to pay at least 30% of the personal injury insurance limit (up to $ 250,000) in the event of total loss incurred as a result of a wildfire or other state of emergency. This rule came into force on January 1, 2021, so the victims of the massive Creek Fire in Fresno and Madera counties that suffered losses at the end of 2020 would not benefit from this change. Several other rules should have retroactive application to all policies, not just existing policies before the latest adoptions. If your insurance was terminated just before the government declared your area a disaster zone, you would have a strong interest in reversing the cancellation or non-renewal retroactively. As insurance is a matter of general interest, the state should be allowed to exercise its police power to adopt legislation and case law that affect existing policies for the protection of policyholders.
1 Derek Chaiken. California protects homeowners from cancellations due to forest fires . Real estate insurance coverage law blog. August 28, 2021.
2 McHugh et al. v. Protective Life Ins. Co. 2021 WL 3853061 (Cal. 30 August 2021).