Newly-Appointed Insurance Chair Padilla Introduces Comprehensive Insurance Claim Reform

SACRAMENTO – Today, on the eve of the 1-year anniversary of the Eaton Fire, newly-appointed Senate Insurance Committee Chair, Senator Steve Padilla (D-San Diego) and California Insurance Commissioner Ricardo Lara introduced Senate Bill 876, which would comprehensively reform the insurance claims process by cutting red tape, improving payouts, and ending delays and runarounds by insurance companies.

“The last 12 months have made clear the urgent need to update and modernize the claim process to better protect homeowners devasted by these wildfires,” said Senator Padilla. “Homeowners deserve better and our laws need to better protect them to ensure they are compensated in a timely way and not subjected to a maze of roadblocks by insurers.”

“Families are navigating loss, claims, and uncertainty. There is real fear, frustration, and misinformation right now with the pace of recovery,” said Commissioner Lara, who is sponsoring the bill. “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.”

This legislation is in immediate response to the myriad of concerns that arose in the wake of the devasting fires in Los Angeles last winter. Homeowners faced long delays on their claims payouts and had to navigate an overly complex system to request even basic expenses.

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 they violate the law.

• 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.
• Improving recovery by expanding policy limits for Additional Living Expenses by 100% in a declared disaster.
• Expanding up-front payments by requiring Actual Cash Value and structure replacement cost be paid quickly following a total loss, with interest payable if late.
• Providing adequate recovery funds by requiring a mandatory offer of extended and guaranteed replacement cost 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.

SB 876 will be heard in the Senate in the coming months.

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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/