California Legislature Greenlights Comprehensive Insurance Claim Reform

SACRAMENTO – Last night, the California State Legislature passed Senate Bill 876, authored by Senate Insurance Committee Chair Senator Steve Padilla (D-San Diego) and California Insurance Commissioner Ricardo Lara. The bill comprehensively reforms the insurance claims process in California, - cutting red tape, improving payouts, and ending delays and runarounds by insurance companies.

“Wildfire survivors need to be supported throughout their recovery,” said Senator Padilla. “The past year has underscored the urgent need to modernize California’s insurance claims process so wildfire survivors do not face delays, denials, or unnecessary hurdles when trying to access the benefits they paid for. These critical reforms strengthen consumer protections and help ensure families receive timely compensation when they need it most.”

Last year, a series of 14 destructive wildfires burned from January 7-31st and affected the Los Angeles and San Diego County Regions. Most of the damage occurred because of two of the largest fires: the Eaton Fire in Altadena and the Palisades Fire in Pacific Palisades, where more than 12,000 homes were destroyed or damaged. Unfortunately, although climate change has contributed to more severe wildfires and winter storms, decades-old insurance laws have not kept pace.

A year later, Wildfire survivors have continued to report on-going problems with accessing their insurance benefits with delays, denials, and miscommunication from insurance companies at the top of the list of consumer complaints filed with the Department of Insurance since the January 2025 Los Angeles wildfires. A recent survey found that 7 in 10 fire victims are still displaced, creating a “K-shaped recovery,” where the wealthiest advance while others wait. 

SB 876 will reform the insurance claims process by cutting red tape, improving payouts, and ending delays and runarounds by insurance companies. The bill will achieve this by doing the following:

• Requiring a “disaster recovery plan” from insurers for handling claims and meeting timelines – reviewed by the Department in advance and put into effect in an emergency situation.
• Doubling penalties during a declared emergency for violations of insurance fair claims practices and settlement law.
• Requiring insurance companies pay restitution directly to policyholders when engage in unfair claims settlements practice. 

• Addressing delays resulting from the assigning of multiple adjusters by requiring insurance company status reports to policyholders within 5 days anytime a new adjuster is assigned.
• Providing adequate recovery funds by requiring a mandatory offer of extended replacement cost coverage and additional living expenses coverage when writing a policy, and regular updated replacement cost estimates for new business and renewals.
• Safer rebuilding by applying mandatory building code upgrade coverage at the time of rebuild – not at the time of loss – to account for updated rules.

The bill is sponsored by California Department of Insurance.

“Wildfire survivors need the power to recover on their terms, not on insurance companies’ terms. The Disaster Recovery Reform Act takes what we heard directly from thousands of wildfire survivors and turns it into concrete action,” said Insurance Commissioner Ricardo Lara, the sponsor of SB 876. “Our comprehensive legislation speeds up disaster recovery for homeowners and renters by putting an end to runarounds and red tape. I thank the survivors who bravely told me their stories and Senator Padilla for his courageous leadership, and I urge Governor Newsom to finish their fight and sign SB 876.”

The Department’s review of more than 2,000 complaints filed by L.A. wildfire survivors against insurance companies has resulted in more than $338 million in additional payments. SB 876 would improve insurance company claims payments and strengthen consumer protections in future disasters.

SB 876 passed the Senate 26-9 and the Assembly 44 to 16. The bill now heads to Governor Newsom’s desk for his signature.

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Steve Padilla represents the 18th Senate District, which includes the communities of Chula Vista, the Coachella Valley, Imperial Beach, the Imperial Valley, National City, and San Diego. Prior to his election to the Senate in 2022, Senator Padilla was the first person of color ever elected to city office in Chula Vista, the first Latino Mayor, and the first openly LGBT person to serve or be elected to city office. Website of Senator Steve Padilla: https://sd18.senate.ca.gov/