State senators have introduced three new bills that aim to address major insurance issues exposed by last year’s Malibu and Altadena fires, particularly inadequate policy limits and living cost provisions that run out before a home is rebuilt.
The proposals focus on what happens after a declared disaster. When homeowners are displaced, rebuilding costs spike and many people discover their coverage falls short. Together, they would expand living-expense benefits, speed up claim payments and reduce the risk that homeowners are left underinsured when they try to rebuild.
The insurance industry has come out against the bills, arguing they would add unaccounted-for costs and disrupt how policies are priced.
The new legislation also adds another wrinkle to efforts by the Legislature and the Insurance Department to rehabilitate the state’s homeowner’s insurance market, which has been devastated by skyrocketing wildfire costs and insurers pulling back from writing new policies.
Here’s a look at the three bills, what they would do and how they may affect policyholders if they become law.
SB 876: Expanded coverage and faster payments
The measure follows complaints from homeowners who discovered too late that their coverage was insufficient to help rebuild after the fires. If passed and signed into law, the bill would:
- Expand additional living expense coverage by 100% during a declared disaster. For homeowners forced out of their homes for months or longer, that could mean substantially more help paying for temporary housing while their home is being rebuilt.
- Require insurers to pay the actual cash value of the structure and the undisputed portion of replacement cost quickly after the loss. If those payments are late, interest would accrue.
- Require insurers to make a mandatory offer of extended and guaranteed replacement cost coverage when writing a new policy. Insurers would also have to provide regular, updated replacement cost estimates to new customers and during policy renewals. This would inform policyholders when coverage no longer reflects current rebuilding costs.
- Apply mandatory building code upgrade coverage at the time of rebuild rather than at the time of loss. This aims to address another issue: building codes often change after major disasters, which can lead to higher costs for homeowners rebuilding months or years later.
Supporters say these changes would give homeowners more certainty and liquidity when they need it most. Opponents say the expanded benefits could push premiums higher and make coverage harder to find in some areas.
SB 877: Faster access to claim information
The bill would require insurers to provide claims-related documents to policyholders within 15 days.
For homeowners juggling contractors, public adjusters and local rebuilding requirements, quicker access to documents may reduce confusion and potential disputes.
SB 878: Penalties for late payments
Under the bill, insurers that fail to meet claims payment deadlines would be required to pay interest at an annual rate of 20% on late payments.
Backers argue the bill would strengthen existing prompt-payment rules by giving insurers a stronger incentive to meet deadlines. Insurers counter steep penalties could increase costs.
The takeaway
The bills were just introduced and have yet to see their first hearings. If they become law, a number of provisions could change over the course of this year’s legislative session.
Whether they become law — and in what final form — could shape how future wildfire claims are handled, how much homeowners pay for coverage and what options remain available in high-risk areas.