SB 878: Insurance business practices.

1078.

(a) Upon receiving notice of a claim under a policy of residential property insurance, as defined in Section 10087, every insurer shall immediately, but in no event more than 15 calendar days later, do the following unless the notice of claim received is a notice of legal action:

(1) Acknowledge receipt of the notice to the claimant unless payment is made within that period of time.

(2) Provide the claimant with the necessary forms, instructions, and reasonable assistance, including, but not limited to, specifying the information the claimant is required to provide for proof of loss.

(3) Begin any necessary investigation of the claim.

(b) (1) Upon receiving proof of loss of a residential property insurance claim, an insurer shall immediately, but in no event more than 40 calendar days later, accept or deny the claim, in whole or in part. The amounts accepted, denied, and undetermined shall be clearly documented in writing to the claimant.

(2) If more than 40 days is required to determine whether a claim subject to this section will be accepted or denied, in whole or in part, the insurer shall provide the claimant with written notice of the need for additional time within 40 days. The written notice shall specify any additional information the insurer requires in order to make a determination and state any continuing factual reasons for the insurer’s inability to make a determination. Thereafter, written notice shall be provided every 30 calendar days until a determination is made or notice of legal action is served. If the determination cannot be made until some future event occurs, then the insurer may comply with this continuing notice requirement by advising the claimant of the specific future event and providing an estimate as to when the determination can be made.

(c) Upon acceptance of a residential property insurance claim, in whole or in part, an insurer shall immediately, but in no event more than 30 calendar days later, tender payment or otherwise take action to perform its claim obligation. The amount of the claim to be tendered is the amount that has been accepted by the insurer. A payment that is not made pursuant to this section within 30 calendar days shall accrue interest payable to the insured pursuant to Section 2057.

2051.

(a) Under an open policy, the measure of indemnity in fire insurance is the expense to the insured of replacing the thing lost or injured in its condition at the time of the injury, the expense being computed as of the time of the commencement of the fire.

(b) (1) Under an open policy that requires payment of actual cash value, the measure of the actual cash value recovery, in whole or partial settlement of the claim, for either a total or partial loss to the structure or its contents, shall be the amount it would cost the insured to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deduction for physical depreciation based upon its condition at the time of the injury or the policy limit, whichever is less. A deduction for physical depreciation shall apply only to components of a structure that are normally subject to repair and replacement during the useful life of that structure.

(2) If there is a total loss to the insured structure, the insurer shall pay the actual cash value associated with the primary structure and other insured structures, as determined by this section, within 30 calendar days from the date the property is determined to be a total loss. A payment that is not made pursuant to this section within 30 calendar days shall accrue interest payable to the insured pursuant to Section 2057.

(A) If the insured property is located in an area subject to an evacuation order, restricted access, or other governmental safety restrictions that prevent inspection of the property, the 30-calendar-day period described in this paragraph shall not commence until the property becomes reasonably accessible for inspection or the insurer has received the information reasonably necessary to determine that the property is a total loss.

(B) If the insurer is awaiting information from the policyholder that is material and relevant to determining the actual cash value of the primary structure and other insured structures, the 30-calendar-day period described in this paragraph shall be tolled until the necessary information is received.

2051.5.

(a) (1) Under an open policy that requires payment of the replacement cost for a loss, the measure of indemnity is the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less.

(2) If the policy requires the insured to repair, rebuild, or replace the damaged property in order to collect the full replacement cost, the insurer shall pay the actual cash value of the damaged property, as defined in Section 2051, until the damaged property is repaired, rebuilt, or replaced. Once the property is repaired, rebuilt, or replaced, the insurer shall pay the difference between the actual cash value payment made and the full replacement cost reasonably paid to replace the damaged property, up to the limits stated in the policy.

(3) After a payment is made pursuant to paragraph (2) of subdivision (b) of Section 2051, and after the insurer has received adequate proof of loss and documentation reasonably sufficient to determine the amount payable, an insurer shall pay the undisputed amount of replacement cost associated with the primary structure and other insured structures, up to the limits in the policy, within 30 calendar days from the occurrence of either of the following:

(A) The date upon which the insured obtains a valid and executed contract with a licensed contractor to rebuild the insured structure at its original location or at another location.

(B) The date upon which the insured enters into contract or escrow to purchase a replacement home at another location pursuant to subdivision (c).

(4) A payment that is not made pursuant to this section within 30 calendar days shall accrue interest payable to the insured pursuant to Section 2057.

(b) (1) (A) A time limit of less than 12 months from the date that the first payment toward the actual cash value is made shall not be placed upon an insured in order to collect the full replacement cost of the loss, subject to the policy limit.

(B) In the event of a loss relating to a “state of emergency,” as defined in Section 8558 of the Government Code, a time limit of less than 36 months from the date that the first payment toward the actual cash value is made shall not be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit.

(C) This section does not prohibit an insurer from allowing the insured additional time to collect the full replacement cost.

(2) An insurer shall provide to a policyholder one or more additional extensions of six months for good cause pursuant to subparagraph (A) or (B) of paragraph (1) if the insured, acting in good faith and with reasonable diligence, encounters a delay or delays in approval for, or reconstruction of, the home or residence that are beyond the control of the insured. Circumstances beyond the control of the insured include, but are not limited to, unavoidable construction permit delays, the lack of necessary construction materials, or the unavailability of contractors to perform the necessary work.

(3) (A) In the event of a loss relating to a state of emergency, as defined in Section 8558 of the Government Code, an insurer shall not require the insured to provide proof of loss less than 100 days after the loss.

(B) The insurer shall provide to the insured one or more additional extensions of three months for submission of proof of loss for good cause if the insured, acting in good faith and with reasonable diligence, encounters a delay in providing proof of loss that is beyond the control of the insured. Circumstances beyond the control of the insured may include, but are not limited to, any of the following, where applicable to the specific claim:

(i) Delays by the insurer in acknowledging the claim or providing the claimant necessary forms, instructions, and reasonable assistance, including, but not limited to, specifying the information the claimant must provide for proof of loss.

(ii) For personal property coverage, the fact that a personal property inventory is premature if the primary structure has not yet commenced construction.

(iii) The unavailability of contractors to either perform the necessary work or create an estimate to rebuild, repair, or replace.

(iv) The disability, injury, or incapacity of the insured.

(v) The inability of the insured to access the insured property as a result of governmental action or because the insured property is located in an area that is exposed to hazardous materials posing a health risk.

(c) (1) In the event of a total loss of the insured structure, a policy issued or delivered in this state shall not contain a provision that limits or denies, on the basis that the insured has decided to rebuild at a new location or to purchase an already built home at a new location, payment of the building code upgrade cost or the replacement cost, including any extended replacement cost coverage, to the extent those costs are otherwise covered by the terms of the policy or any policy endorsement. However, the measure of indemnity shall not exceed the replacement cost, including the building code upgrade cost and any extended replacement cost coverage, if applicable, to repair, rebuild, or replace the insured structure at its original location.

(2) Notwithstanding any other law, for a residential property insurance policy, the measure of damages available to a policyholder to use to rebuild or replace the insured home at another location shall be the amount that would have been recoverable had the insured dwelling been rebuilt at its original location, and a deduction for the value of land at the new location shall not be permitted from that measure of damages. However, the measure of indemnity shall not exceed the cost, including the building code upgrade cost and any extended replacement cost coverage, if applicable, to rebuild the insured structure at its original location.

(d) This section does not prohibit an insurer from restricting payment in cases of suspected fraud.

(e) On and after July 1, 2026, all policy forms issued or renewed by an insurer shall comply with this section in its entirety, including the changes made to this section by the act that added this paragraph.

2051.5.

(a) (1) Under an open policy that requires payment of the replacement cost for a loss, the measure of indemnity is the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less.

(2) If the policy requires the insured to repair, rebuild, or replace the damaged property in order to collect the full replacement cost, the insurer shall pay the actual cash value of the damaged property, as defined in Section 2051, until the damaged property is repaired, rebuilt, or replaced. Once the property is repaired, rebuilt, or replaced, the insurer shall pay the difference between the actual cash value payment made and the full replacement cost reasonably paid to replace the damaged property, up to the limits stated in the policy.

(3) After a payment is made pursuant to paragraph (2) of subdivision (b) of Section 2051, and after the insurer has received adequate proof of loss and documentation reasonably sufficient to determine the amount payable, an insurer shall pay the undisputed amount of replacement cost associated with the primary structure and other insured structures, up to the limits in the policy, within 30 calendar days from the occurrence of either of the following:

(A) The date upon which the insured obtains a valid and executed contract with a licensed contractor to rebuild the insured structure at its original location or at another location.

(B) The date upon which the insured enters into contract or escrow to purchase a replacement home at another location pursuant to subdivision (c).

(4) A payment that is not made pursuant to this section within 30 calendar days shall accrue interest payable to the insured pursuant to Section 2057.

(b) (1) (A) A time limit of less than 12 months from the date that the first payment toward the actual cash value is made shall not be placed upon an insured in order to collect the full replacement cost of the loss, subject to the policy limit.

(B) In the event of a loss relating to a “state of emergency,” as defined in Section 8558 of the Government Code, a time limit of less than 36 months from the date that the first payment toward the actual cash value is made shall not be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit.

(C) This section does not prohibit an insurer from allowing the insured additional time to collect the full replacement cost.

(2) An insurer shall provide to a policyholder one or more additional extensions of six months for good cause pursuant to subparagraph (A) or (B) of paragraph (1) if the insured, acting in good faith and with reasonable diligence, encounters a delay or delays in approval for, or reconstruction of, the home or residence that are beyond the control of the insured. Circumstances beyond the control of the insured include, but are not limited to, unavoidable construction permit delays, the lack of necessary construction materials, or the unavailability of contractors to perform the necessary work.

(3) (A) In the event of a loss relating to a state of emergency, as defined in Section 8558 of the Government Code, an insurer shall not require the insured to provide proof of loss less than 100 days after the loss.

(B) The insurer shall provide to the insured one or more additional extensions of three months for submission of proof of loss for good cause if the insured, acting in good faith and with reasonable diligence, encounters a delay in providing proof of loss that is beyond the control of the insured. Circumstances beyond the control of the insured may include, but are not limited to, any of the following, where applicable to the specific claim:

(i) Delays by the insurer in acknowledging the claim or providing the claimant necessary forms, instructions, and reasonable assistance, including, but not limited to, specifying the information the claimant must provide for proof of loss.

(ii) For personal property coverage, the fact that a personal property inventory is premature if the primary structure has not yet commenced construction.

(iii) The unavailability of contractors to either perform the necessary work or create an estimate to rebuild, repair, or replace.

(iv) The disability, injury, or incapacity of the insured.

(v) The inability of the insured to access the insured property as a result of governmental action or because the insured property is located in an area that is exposed to hazardous materials posing a health risk.

(c) (1) In the event of a total loss of the insured structure, a policy issued or delivered in this state shall not contain a provision that limits or denies, on the basis that the insured has decided to rebuild at a new location or to purchase an already built home at a new location, payment of the building code upgrade cost or the replacement cost, including any extended replacement cost coverage, to the extent those costs are otherwise covered by the terms of the policy or any policy endorsement. However, the measure of indemnity shall not exceed the replacement cost, including the building code upgrade cost and any extended replacement cost coverage, if applicable, to repair, rebuild, or replace the insured structure at its original location.

(2) Notwithstanding any other law, for a residential property insurance policy, the measure of damages available to a policyholder to use to rebuild or replace the insured home at another location shall be the amount that would have been recoverable had the insured dwelling been rebuilt at its original location, and a deduction for the value of land at the new location shall not be permitted from that measure of damages. However, the measure of indemnity shall not exceed the cost, including the building code upgrade cost and any extended replacement cost coverage, if applicable, to rebuild the insured structure at its original location.

(d) This section does not prohibit an insurer from restricting payment in cases of suspected fraud.

(e) On and after July 1, 2026, all policy forms issued or renewed by an insurer shall comply with this section in its entirety, including the changes made to this section by the act that added this paragraph.

(f) This section shall remain in effect only until January 1, 2028, and as of that date is repealed.

2051.5.

(a) (1) Under an open policy that requires payment of the replacement cost for a loss, the measure of indemnity is the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less.

(2) If the policy requires the insured to repair, rebuild, or replace the damaged property in order to collect the full replacement cost, the insurer shall pay the actual cash value of the damaged property, as defined in Section 2051, until the damaged property is repaired, rebuilt, or replaced. Once the property is repaired, rebuilt, or replaced, the insurer shall pay the difference between the actual cash value payment made and the full replacement cost reasonably paid to replace the damaged property, up to the limits stated in the policy.

(3) After a payment is made pursuant to paragraph (2) of subdivision (b) of Section 2051, and after the insurer has received adequate proof of loss and documentation reasonably sufficient to determine the amount payable, an insurer shall pay the undisputed amount of replacement cost associated with the primary structure and other insured structures, up to the limits in the policy, within 30 calendar days from the occurrence of either of the following:

(A) The date upon which the insured obtains a valid and executed contract with a licensed contractor to rebuild the insured structure at its original location or at another location.

(B) The date upon which the insured enters into contract or escrow to purchase a replacement home at another location pursuant to subdivision (c).

(4) A payment that is not made pursuant to this section within 30 calendar days shall accrue interest payable to the insured pursuant to Section 2057.

(b) (1) (A) A time limit of less than 12 months from the date that the first payment toward the actual cash value is made shall not be placed upon an insured in order to collect the full replacement cost of the loss, subject to the policy limit.

(B) If a loss is relating to a state of emergency, as defined in Section 8558 of the Government Code, a time limit of less than 36 months from the date that the first payment toward the actual cash value is made shall not be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit.

(C) This section does not prohibit an insurer from allowing the insured additional time to collect the full replacement cost.

(2) An insurer shall provide to a policyholder one or more additional extensions of six months for good cause pursuant to subparagraph (A) or (B) of paragraph (1) if the insured, acting in good faith and with reasonable diligence, encounters a delay or delays in approval for, or reconstruction of, the home or residence that are beyond the control of the insured. Circumstances beyond the control of the insured include, but are not limited to, unavoidable construction permit delays, the lack of necessary construction materials, or the unavailability of contractors to perform the necessary work.

(3) (A) If a loss is relating to a state of emergency, as defined in Section 8558 of the Government Code, an insurer shall not require the insured to provide proof of loss less than 100 days after the loss.

(B) The insurer shall provide to the insured one or more additional extensions of three months for submission of proof of loss for good cause if the insured, acting in good faith and with reasonable diligence, encounters a delay in providing proof of loss that is beyond the control of the insured. Circumstances beyond the control of the insured may include, but are not limited to, any of the following, where applicable to the specific claim:

(i) Delays by the insurer in acknowledging the claim or providing the claimant necessary forms, instructions, and reasonable assistance, including, but not limited to, specifying the information the claimant must provide for proof of loss.

(ii) For personal property coverage, the fact that a personal property inventory is premature if the primary structure has not yet commenced construction.

(iii) The unavailability of contractors to either perform the necessary work or create an estimate to rebuild, repair, or replace.

(iv) The disability, injury, or incapacity of the insured.

(v) The inability of the insured to access the insured property as a result of governmental action or because the insured property is located in an area that is exposed to hazardous materials posing a health risk.

(c) (1) If there is a total loss of the insured structure, a policy issued or delivered in this state shall not contain a provision that limits or denies, on the basis that the insured has decided to rebuild at a new location or to purchase an already built home at a new location, payment of the building code upgrade cost or full replacement cost, including any extended replacement cost coverage, to the extent those costs are otherwise covered by the terms of the policy or any policy endorsement. However, the measure of indemnity shall not exceed the replacement cost, including the building code upgrade cost and any extended replacement cost coverage, if applicable, to repair, rebuild, or replace the insured structure at its original location, up to the limits stated in the policy. Notwithstanding a provision in a policy issued, amended, or renewed on or after January 1, 2028, for purposes of this paragraph, if the insured has decided to rebuild at a new location or to purchase an already built home at a new location, the building code upgrade cost payable shall include all costs that would have been incurred if the insured structure been completely rebuilt at its original location.

(2) Notwithstanding any other law, for a residential property insurance policy, the measure of damages available to a policyholder to use to rebuild or replace the insured home at another location shall be the amount that would have been recoverable had the insured dwelling been rebuilt at its original location, and a deduction for the value of land at the new location shall not be permitted from that measure of damages. However, the measure of indemnity shall not exceed the cost, including the building code upgrade cost and any extended replacement cost coverage, if applicable, to rebuild the insured structure at its original location.

(d) This section does not prohibit an insurer from restricting payment in cases of suspected fraud.

(e) This section shall become operative on January 1, 2028.