California adopts sweeping insurance code changes – Insurance
Assembly Bill 1511 was recently enacted in California. The omnibus bill, which is a consolidation of multiple legislative efforts, amends, among other things, certain provisions of the California Insurance Code regarding (1) notices of renewal or non-renewal of residential property insurance policies, ( 2) investments by insurers, (3) claims against insurers, (4) the power of the insurance commissioner to order persons who violate the Insurance Code, (5) the law on insurance experts and ( 5) the State Compensation Insurance Fund.
Through this alert, Michelman & Robinson, LLP provides an overview of the law that comes into force on January 1, 2022.
Renewal offers and non-renewal notice
The bill amends article 678 of the Insurance Code with regard to renewal and non-renewal notices. The provision now states that effective July 1, 2022, the current submission requirements and response times apply to home insurance renewal offers or notices of non-renewal in a timely manner. These requirements require insurers to post renewal offers or non-renewal notices at least 45 days before a policy expires, but extends this period to 75 days for policies expiring on or after July 1, 2020. L The amendment serves to lock these mailings. requirements – which also include extensions specified for sending to recipients in California, outside of California but in the United States and outside the country – as of July 1, 2022. It should be noted that the Bill applies current mailing and notice requirements to workers’ compensation. policies in addition to residential property insurance.
Investments by insurers
According to the bill, the limitations are increased until January 1, 2027 for incorporated domestic insurers that make discretionary investments, including the purchase or lending of property and securities.
As amended, the law now provides that investments under Article 1210 of the Insurance Code must not exceed, in total, the lesser of: (1) 5% of the insurer’s admitted assets or (2 ) 50% of the excess of the assets admitted to the assets over the sum of the paid-up capital, the liabilities and the surplus required by article 700.02 of the Insurance Code (determined by the last annual statement of conditions and affairs of the ‘insurer).
Insurance Experts Act
The bill also amends parts of the Insurance Adjusters Act by adding two new parts that are to be exempt from bonding requirements: (1) licensed adjusters, or an employee of a licensed who settles claims under the direction of a qualified licensee a manager and who has posted a bond or certificate of insurance, and (2) a licensed adjuster, licensee’s employees or manager qualified person who adjusts the claims of an association, organization, partnership, limited liability company or company that has posted a bond or certificate of insurance.
In addition, the bill specifies that a bond or certificate of insurance must provide the names of all qualified adjusters, employees and managers who perform duties under it. A relevant form must be provided by the Insurance Commissioner and any changes must be made within 30 days. If the required names are not provided, the permit must be at once suspended.
National Compensation Insurance Fund
AB 1511 extends the investment authorization that the Board of Directors of the State Compensation Insurance Fund is to invest until January 1, 2027. The Insurance Fund may also make discretionary investments in property and securities and invest in money market mutual funds until that same date.
Updated fraud warning
The bill requires that the fraud warning included on certain application forms for liability insurance policies and for changes to existing policies be updated. According to the amendment, the applicable statement should read as follows: “Anyone who knowingly presents false or fraudulent information to obtain or modify insurance coverage or to make a claim for payment of a loss is guilty of a felony and may be punishable by fines and confinement in a state prison. This language should be preceded by the following verbiage (or similar): “For your protection, California law requires the following to appear on this form.”
We understand that the American Property Casualty Insurance Association has received clarification from the Department of Insurance regarding the updated fraud warning requirement. Please let us know if you are interested in the details provided by the ministry.
Finally, AB 1511 modifies article 10103.7 of the Insurance Code relating to replacement values. The old law required insurers to pay the replacement value of structures and contents, even if an insured did not replace anything. The law as amended continues to require insurers to pay replacement value, but removed the term “content” from the law. That being said, the amendment still requires insurers to offer payment for content coverage for personal property at least 30% of the policy limit applicable to the covered structure.
Without a doubt, AB 1511 is far reaching and touches on a myriad of provisions contained in the Insurance Code.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.