BILL BRIEF INSURANCE UPDATES

BY: KIMBERLY LILLEY, CIRMS, CMCA, BERG INSURANCE AGENCY

So far in this legislative session we have only had a few insurance bills that specifically impact community associations in California, due to legislators and the Governor asking the Department of Insurance to take steps to improve the situation before the end of the session. Here are those bills:

AB 2996 (Alvarez) – FAIR Plan

This bill was originally going to codify the promise the DOI made that the $20 million dollar California FAIR Plan limit would apply PER BUILDING, instead of PER LOCATION (which would be the entire community association), dramatically increasing larger associations’ ability to obtain adequate insurance coverage. That has since been amended out of the bill. [NOTE: while the DOI has said that this per building coverage is available, it is not yet available in practice.]

This bill DOES continue to codify exactly how the FAIR Plan will assess member carriers in the event a large loss exceeds the amount of money the FAIR Plan has to pay out on claims, and it provides a provision for them to sell bonds to pay for those assessments, which provides a bit of relief for over-exposed carriers in the California insurance market.

This also removes “Diligent Search” requirements, which means there is no need to exhaust every admitted option before moving to the FAIR Plan. Insurance experts advise that you will likely want to exhaust every other option (even non-admitted) before going to the FAIR Plan because the coverage is typically inadequate for community associations in California, without additional coverage purchased elsewhere. Additionally, the cost is quite high.

SB 1060 (Becker) – Risk Modeling

This requires a property insurer to employ risk models for underwriting purposes that account for wildfire risk reduction associated with hazardous fuel reduction, home hardening and defensible space creation. This would force carriers to include discounts for actions that may keep people safe but may in no way reduce the cost that the carriers will ultimately bear in a loss. Also, these factors are already being considered to some extent, as these factors are used in fire modeling (i.e., “fire scores”) used by the carriers to underwrite risks.

Ultimately, just as community associations often have difficulty with sweeping laws that treat every association the same, no matter the size, makeup, etc., this would paint carriers with a large regulatory brush that may encourage carriers to stay OUT of the market, instead of coming back in.

AB 2260 (Calderon) – FAIR Plan Reporting

This requires the CaliforniaFAIR Plan, until December 31, 2027, to provide reporting about policies and clearinghouse programs to the DOI, the Assembly and Senate Committees on Insurance, and to have a public posting on their website on a quarterly basis. Since we have a goal of moving policies out of the FAIR Plan and back into the admitted market (those communities that have done mitigation work get to be the top of that list), we want a way of tracking how successful we are at it. This is a way of keeping track.

We continue to attend hearings and workshops and meet with legislators to discuss what moving forward might look like. We will also be involved in helping to create and launch insurance education for legislative staffers to be sure they have the resources they need to provide the best advice to their legislators.

Kimberly Lilley, CIRMS, CMCA, is the Director of Advocacy, PR and Marketing for Berg Insurance Agency in partnership with LaBarre/Oksnee and may be reached at kimberly@berginsurance.com.