California Senate Passes Comprehensive Insurance Claim Reform Legislation

SACRAMENTO – Today, the California State Senate passed Senate Bill 876 authored by Senate Insurance Committee Chair Senator Steve Padilla (D-San Diego) and California Insurance Commissioner Ricardo Lara which would comprehensively reform the insurance claims process by cutting red tape, improving payouts, and ending delays and runarounds by insurance companies.

“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,” said Senator Padilla. “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.”

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.  [1]

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 engaging 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.

SB 876 passed with a vote of 30-9. The bill will be heard in the Assembly 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/