California lawmakers are continuing efforts to strengthen consumer protections for residential insurance following recent catastrophe losses, with the Senate approving SB 876, a wide-ranging insurance reform bill focused on claims administration and coverage transparency, on May 27. The measure now heads to the Assembly for further consideration.
"Families are navigating loss, claims, and uncertainty. There is real fear, frustration, and misinformation right now with the pace of recovery," California Insurance Commissioner Ricardo Lara, co-sponsor of the bill, said in a release when SB 876 was introduced. "We will measure success when people can recover without red tape and delays, get coverage on their own terms, and rebuild so they are out of harm's way in the future. While our focus is on insurance, recovery is multifaceted, not one-dimensional. Federal, state, local, and private coordination is required for a successful recovery."
The version of SB 876 passed by the Senate would require residential property insurers to offer extended replacement-cost coverage equal to at least 50% above dwelling and other-structure policy limits. If applicants decline the additional coverage, they would be required to sign an acknowledgment confirming the offer was presented. The proposal would also apply to California FAIR Plan policies where replacement-cost coverage is available.
Claims handling reforms represent another major focus of the legislation. For catastrophe-related claims tied to declared states of emergency, insurers would need to assign a primary adjuster responsible for overseeing the claim. Carriers would also be required to notify insureds in writing within five business days whenever a subsequent adjuster is assigned. The provision is intended to address policyholder complaints about inconsistent communications and repeated claim handoffs following major wildfire events.
The bill additionally expands requirements tied to additional living expenses coverage. Insurers would be required to offer extended ALE limits above standard policy levels, while coverage periods would extend 15 calendar days beyond the date a property is deemed habitable to allow insureds time to move back into their homes. The legislation also specifies that ALE coverage must include reasonable costs necessary to maintain a comparable standard of living after a covered loss.
"The past year has underscored the urgent need to modernize California's insurance claims process so wildfire survivors are treated fairly and supported through recovery," Senate Insurance Committee Chair Senator Steve Padilla, who co-sponsored the bill with Lara, said in a release. "Homeowners should not face delays, denials, or unnecessary hurdles when trying to access the benefits they paid for. This bill strengthens consumer protections and helps ensure families receive timely compensation when they need it most."
Commissioner Lara has framed the proposal as part of a broader effort to improve consumer outcomes after disasters while rebuilding confidence in California's strained property insurance market. Industry groups are expected to scrutinize the measure's compliance burdens and potential effects on underwriting costs as the bill moves through the Assembly process.
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