California Disaster Recovery Reform Act Signed Into Law: Doubled Claim Penalties Take Effect in 2027
The California Department of Insurance announced on September 28 that Governor Gavin Newsom has signed Senate Bill 876, the Disaster Recovery Reform Act, a far-reaching set of consumer protections for homeowners and renters recovering from wildfires and other major disasters. Sponsored by Insurance Commissioner Ricardo Lara and authored by Senate Insurance Committee Chair Steve Padilla, the law is the most comprehensive update to California's claims-handling laws in more than 30 years, according to the department.
The law requires insurers to file a disaster recovery plan with the department in advance, setting out how claims will be handled and timelines met once an emergency is declared. Penalties for violations of fair claims practices during a declared emergency are doubled, and insurers that engage in unfair claims settlement practices must pay restitution directly to policyholders.
To address delays caused by rotating adjusters, the law requires insurers to send policyholders a status report within 15 days whenever a new adjuster is assigned. Insurers must also offer extended replacement cost coverage and additional living expenses coverage when a policy is written, provide regularly updated replacement cost estimates, and apply building code upgrade coverage at the time of rebuild rather than the time of loss.
"Today we are telling every wildfire survivor who shared their story: We heard you, and now it's the law," Commissioner Lara said. "No family who has lost everything should have to fight their insurance company to get the benefits they paid for." Senator Padilla said: "When disaster strikes, families shouldn't have to face a second disaster in the claims process."
The department said its review of more than 2,000 complaints from Los Angeles wildfire survivors has already produced more than $338 million in additional payments to policyholders, including more than $50 million related to smoke damage. Governor Newsom also signed the Lara-sponsored Smoke Damage Recovery Act (AB 1795). The department said SB 876 takes effect January 1, 2027.
(Source: California Department of Insurance)
Source: California Department of Insurance
Published by GSM · USA (original Chinese edition)
Photo: 加州保险厅厅长 Ricardo Lara 官方肖像。 Official portrait of California Insurance Commissioner Ricardo Lara. Public domain，摄影：加州政府 State of California。图片来源 Source image: https://www.insurance.ca.gov
