Two Homeowners Bills Move to California Assembly

The California State Senate recently passed SB 2 and SB 518, two homeowners bills that are now in the Assembly Insurance Committee. Both bills passed 23-15 in the Senate.

SB 2, authored by Senator Jackie Speier (D-Hillsborough), is intended to address some of the problems that resulted from the devastating 2003 Southern California wildfires. Speier has said that only about 50 percent of San Diego homes that were destroyed in the fires have been rebuilt. The bill would require insurance companies to pay additional living expenses for two years instead of one for homeowners who lose their homes in fires and natural disasters. Insurers said that such requirements would generally be unnecessary.

“Not everybody needs two years of coverage,” said Dan Dunmoyer, president of the Personal Insurance Federation of California. “Low income city dwellers do not need two years of coverage. Homes don’t [usually] burn down in an area surrounded by cement, asphalt and steel. [But] if you live in a firestorm area or a brush area, two years is a good idea to have.”

Dunmoyer said that the requirement could lead to higher rates for California homeowners. “Any time you mandate, we charge more to enforce more coverage,” he said. “Then we tend to offend our customers more than we tend to help them. We are very concerned about cost, especially to solve a problem in one firestorm area that cost millions of Californians more money. That’s just not a balanced or fair policy. That’s been the crux of our concern with SB 2.”

Another component of the bill would remove the requirement for homeowners to complete an inventory of their belongings. Consumers could receive 85 percent of their contents coverage without doing an inventory. To receive 100 percent of their losses, homeowners would have to complete a detailed inventory.

“We have some people in San Diego who had 10 percent of [their contents] lost in their home, and effectively under this bill they would get hundreds of thousands of dollars for losses that never occurred,” Dunmoyer said. “That puts insurance on its head. It changes from insurance and moves it over to what we can an added value policy. Insurance is not an investment or lottery policy, or a partial benefits policy. Insurance is replacing the losses you have.”

SB 518, like SB 2, would require two years of coverage for additional living expenses. SB 518 is supported by the California Department of Insurance and is being carried by Senator Christine Kehoe (D-San Diego).

The bill also would stop insurance companies from using a computerized valuation system unless it is approved by CDI and would also require agents to take a valuation course, according to Robb Greenspan, principal of California-based The Greenspan Co./Adjusters International. He said that the certification requirement for agents would not necessarily ensure more accurate home valuations.

“You’re going to sit for two or three hours through a valuation course and you’ll learn all the ins and outs of it, but you’re still not going to be able to value a building,” Greenspan said.

“It takes a contractor. [It’s better] to go to the source. Go to the vendor and ask, ‘How much will it cost to replace it if [the homeowner] lost everything?’ You need to ask the proper questions,” he added.

The bill also would require insurance companies to provide homeowners with a copy of their policies within 21 days of a fire loss upon the consumer’s request.

“If we have a disaster like an earthquake and have 600,000 claims, you can’t get policies to everybody,” Dunmoyer said. “You can’t even find their home in 21 days. It’s just impossible. We’re trying to work that out [with legislators].”

SB 518 also would clarify homeowners’ rights in relation to public adjusters and statutes of limitation with regards to filing claims.

The bills will likely be set for hearing in the Assembly in the coming weeks.

Topics California Homeowners Numbers