Senate Standing Committee on Insurance

The Senate Committee will begin in 60 seconds. The Senate Committee will come to order. Good afternoon, everyone. Thank you so much for being here today. Can we please ask all Members to come to room 2100 in the swing space so we can establish a full quorum? But I see that we have some arrivals, so I'm going to ask. Madam Secretary, please call the roll.

[Roll call]

We do have a corner today. We have six bills on the agenda, two which are on consent. So I'm going to start by calling roll on consent calendar. Would someone like to make a motion?

So moved.

So moved by Senator Niello. Please call the roll.

[Roll Call]

That Bill. I'm sorry. The consent calendar will remain on call for the absent Members. We will proceed with our first author. Senator Wahab will be presenting SB260. Senator Wahab, when you're ready.

Thank you. Chair, colleagues and Members of the public, first, I want to thank the Committee staff for their hard work through these amendments in this Bill. We shared those amendments with the Office of Committee Members. So I just want to be very transparent in what we're doing.

And should this Bill come out of Committee today, the proposed amendments will be adopted in Approps. We also worked with the Department of Insurance on these amendments and their concerns, and I will continue to be working with the chair, you know, on this particular Bill to address any other concerns.

So I just want to be very transparent in that. But here we are to present SB 260, which establishes updated guidelines on the use of unmanned aircraft, otherwise known as drones, over critical infrastructure, as well as their use when making insurance assessments and private property inspections. Drone technology has developed at a rapid pace.

Unfortunately, state regulations have not kept up with the growing concerns that home and property owners have when it comes to home inspections. Insurance carriers are not required to notify property owners of an aerial inspection. Most would consider this lack of notice to the homeowner concerning, and many would say it amounts to an invasion of privacy.

In addition, there is no requirement that you know, that the collected images, again, without the knowledge or consent of the policyholder, are ultimately the property of the policyholder, let alone shared with them. I am open to continuing discussions with industry and the Department regarding the rights of policyholders to remedy issues ahead of potential terminations of contracts.

However, without safeguards, there is no protection for the privacy rights of homeowners. Moreover, this should be considered as a matter of consumer protection. With me, I'd like to introduce my very first witness, Jonathan Feldman, lead lobbyist for the California Police Chiefs Association.

When you're ready, thank you.

Good afternoon, Chair and members. Jonathan Feldman, California Police Chiefs Association. You know, we'll be honest, our primary focus in this Bill is the protections of critical air infrastructure, airspace, and making sure that we're not allowing recreational or commercial drones to damage energy structures, communication infrastructure.

But we'll say that, you know, the police chiefs, over the history of the last 10 years in debating this issue, have had an interest in protecting privacy rights of citizens. Understand that there's going to be ongoing conversations about amendments and making sure that this works on all sides moving forward and we will play a role in those conversations.

But would request your aye vote today in order to move the Bill forward and continue to work. Thank you.

Thank you. Now, I will ask anyone in support of this Bill in the audience to come up. Please state your name and your position. Anyone wishing to speak. Okay. Now, I will invite anyone in opposition to join me here in the table. The lead opposition. You will have two minutes each. Thank you.

Good afternoon. Thank you, Madam Chair, Members of the Committee, Sherry Mchugh, representing the Pacific Association of Domestic Insurance Companies. We are respectfully opposed to SB 260 unless it is amended to address our concerns.

We greatly appreciate the author's willingness and your willingness to work with us to see if we can address those concerns successfully so that we can move a Bill forward that will properly regulate aerial imagery while at the same time maintaining our ability to use it to assist us with underwriting and claims handling.

The concerns that we have at this moment, there are really three specific concerns. The first concern is the 30-day pre notification. It is just simply not workable because the images used in aerial imaging are provided to the insurers by third party vendors, who. They are the ones who take the photos at the request of the insurer.

I mean, sorry, they take the photos, but not at the request of the insurer. Instead, the images are archived and when an insurer asks for photos, then the vendor will give them to us. So we are not in control of when those photos are taken. It is up to the vendor that we use.

We understand the need to provide notification, however, and we understand the importance of doing so.

We would just suggest that we provide that notification with the renewal documents that we send annually to our policyholders and that would be a proper way for them to get notification that we will be using aerial images if that is indeed the case for that insurer. The second issue is 120 day right to cure.

This time frame is simply just not workable with the notice requirements that we have for non renewal notices. We would instead suggest that the Bill be amended to remove the 120 day right to cure and instead allow us to put in place a dispute resolution process.

This would allow the policyholder to contest the accuracy of the image or to demonstrate that they have taken corrective action as it pertains to what caused us concern. Finally, the requirement that the insurer destroy the images after 90 days, that is of concern to us as well.

We have to maintain images and records for certain things such as market conduct exams, demonstration of mitigation, and the possible insurance fraud investigations that we may need to pursue.

We would instead suggest that the Bill be amended to remove that language and simply allow the insurers to comply with the existing insurance code regulations and laws pertaining to record retention for insurers. With that being said, we really look forward to working with the author and all of you on addressing our concerns. Thank you very much.

She went past a little bit, so you're going to have a shorter time, so let's make sure you do it under a minute and 30 seconds.

Good afternoon, Madam Chair, Vice Chair and Members, and the author, Denny Ritter, here on behalf of the American Property Casualty Insurance Association. Rather than echoing the points of my colleague, which we do wholeheartedly agree with, I do want to emphasize that the Bill in print would make the use of aerial imagery almost impossible for insurers.

There may be those who would like to see that use curtailed, but I'd like to explain why we think the unintended consequences of that outcome would not be to the benefit of consumers. Insurers need to have the ability to inspect the properties they insure.

A fundamental component of insurance is confirming that a property conforms to your underwriting standards and importantly, that the policyholder is charged a rate that reflects that risk.

Absent that, homeowners who take the time to maintain their property and vegetation will essentially be subsidizing homeowners who do not as without inspection, we all end up paying roughly a flat rate. Insurers only have so many options for inspecting a property.

There are in person inspections where an employee or vendor for the insurer is sent out to physically inspect a home, and there are Aerial images. Aerial images, as you might imagine, are considerably easier to collect at scale and are much, much more affordable than sending a person to inspect.

If the barriers to utilizing aerial imagery, as they exist in this Bill, are adopted into law, insurers will have to conduct inspections in person, then. That will affect the number of policies that an insurer can write. They simply cannot inspect the number of properties in person that they can via aerial imagery.

It will also increase the cost of inspecting each property. While the cost of an in person inspection can vary greatly, I'm told that it is generally between $75 to $100.

You need to wrap it up. Thank you.

The cost of an aerial inspection is a mere fraction of that and we're worried that will affect the cost, the availability and affordability of insurance in California. With that, thank you for your time. Happy to answer any questions.

Thank you. I'd like to now turn it over to the room here. For anyone wishing to speak in opposition, please state your name, organization and your position. Thank you.

Good afternoon. Allison Adey on behalf of the Personal Insurance Federation, we are also opposed unless amended and align our comments with those of APCIA and Paddock. Thank you.

Aubrey Rodriguez with ACLU California Action in respectful opposition. I'll just add, we do have separate concerns than what was expressed at the table here. Thank you.

Thank you. Anyone else wishing to speak? Okay with that, I will turn it over to Members of this Committee for any questions, comments, comments or concerns.

Have you received the amendments? I'll confess I haven't had the opportunity to review any of these amendments because I just got them last, pretty late last night and there are a few versions and it's gotten a little bit confusing. But have you received the amendments proposed by the Personal Insurance Federation?

Personal Insurance Federation amendments. Did you guys send amendments? So, yes, there has been a lot of conversations happening on this particular Bill. We did receive the amendments that they have sent. We also have been in conversation about other amendments with the Chair.

And you know, I do want to say again, this, this Bill is a work in progress, but the priority for me is the consumer and again, the right to cure, which you have a Bill on as well. And we think that that is reasonable as well as the effort to just be able to work with insurance industry.

And of course, you know, I have had conversations with these ladies before. And again, this is also about consent. An average policyholder doesn't even know that this is happening. And so we're seeing insurances be canceled through no fault of the policyholder except for the fact that they don't know what's going on and why it's been canceled.

So we just want to be able to give some notification time and a little bit of time to correct the issue. We, we know that they have their suggestions and we're going to, you know, debate here and there about, you know, exactly what's best for the consumer.

But the goal is to ensure that insurance companies can provide the coverage but also for policyholders to be able to fix whatever issue is on their property too.

From, from my perspective, I could ask all sorts of questions but I'm not even sure if they're relevant because again, I haven't had the chance to review the amendments.

You indicated it's a work in process and clearly it is very difficult for me to cast a vote either way given the, the unknowns that I have in my mind. So I'm not going to be able to.

And before you make that decision, I can, I can read the proposed amendments for you. So, one is a 30 day noticing requirement that insurers must notify policyholders that they will conduct an assessment of the property in advance of the day images will be taken. So it's a solid month. All retroactively provisions have been struck.

So we're not going to go back. We're going to move forward. Initial two year prohibition for inspections have been struck and added exceptions to provisions requiring insurers destroy imagery collected by unnoticed inspections via drones as well as worked with the Department of Insurance to address concerns on points above and the definition of terms and language.

Excellent. Does that include also the proposals by the Personal Insurance Federation?

We are working with the Chair as well as the industry on those.

Senator Becker.

Thank you. I do think that the notification, I know the notification piece has been raised and I do think some, some notification is important and it sounds like you're working on that. And the amendments, you know, seem to kind of obviously address that piece.

And is the, I guess maybe question for opposition is the record retention. Is that, through the Chair, is record retention question you addressed. Is that captured in these amendments that was just mentioned or there other...

Would you like to respond to that?

Not, not the amendments that were articulated at this point by the author but they are the amendments are included in what we're calling the Personal Insurance Federation draft, yes.

Definitely.

And I also want to highlight this Senator, I think you and I share a deep interest in privacy and the fact that a third party is taking these photos with again without the policyholder even realizing this is happening as well as we do also understand that for a lot of their needs, that they may have to retain imagery for a short period of time as we do our taxes and a bunch of other paperwork that we have to keep in a filing cabinet somewhere.

They have to do it for, you know, their industry standards. But at the same time, we also don't want just imagery left there through a third party that we're completely unaware of as a policyholder, too. So I think that there is a balance to strike, and I think that we're committed to making that happen.

Okay, great. Agree. Good. I agree that there is a balance to strike here. And it sounds like you're working on that. Yeah, it sounds like there's a, you know, a few other issues still to be worked out, but I, I, I, I appreciate the, intent of it, and that you're working through these issues.

So thank you.

Thank you.

Senator Padilla.

Thank you, Madam Chair, and thank the author for bringing it. Clearly, some of the objections that are in the record with respect to how to operationalize this, they don't seem to me to be insurmountable and I think would encourage parties to keep working on that.

I think there's some really important consumer protection components here, and I'm happy to support the Bill moving forward.

Anyone else? Okay, well, thank you so much. First of all, let me just state that normally a Bill like this would not be moving forward in my Committee, but it is the last hearing we have this year, and I've been having incredible conversations with the author in terms of some of the concerns, what we need done.

And because of time limitations, she's fully committed to working with me, working with stakeholders to ensure that we can get to a place that is workable. And I know that there is consumer privacy issues, you know, but I think this is just generally where we, the world we live in.

You know, we have Google driving around, taking pictures of our homes, and just everything seems to be out there. But there's, you know, that balance that we're trying to strike. And so she's fully committed, if you can reiterate that for those concerned here.

So we are fully committed in making sure we are protecting policyholders as much as possible in the age of new technology. We're also very much interested in making sure that insurance providers continue to provide insurance to homeowners. That's one of our biggest concerns, is the policies being canceled.

And, and yes, we do live in a tech age world, but we also, there are limitations. For example, the example you gave with Google, you know, scanning the roads and, you know, having these maps and so forth.

They don't necessarily go into your backyard and look at moss that's growing somewhere or the fact that somebody's a hoarder or things like that, which, you know, we obviously want to prevent. And so that's why it touches also the right to cure aspect of it.

So I think that this has been a very good dialogue where very much committed in working and ensuring that again, insurance providers can continue to provide insurance and policyholders have some rights to this new age.

But to be clear, we're going to continue.

Yes, we're going to continue to work.

You know, we did have a discussion. If it doesn't get to a place that, you know, that I feel it's adequate, I have the right to recall the Bill. And she's in agreement. So with that, would you like to close?

Respectfully ask for an aye vote. Thank you.

Thank you. Please call the roll. Would like to make a motion. Move the Bill by Senator Padilla, please. Madam Secretary, call the roll.

Motion is do pass to Appropriations Committee. [Roll Call]

That Bill will remain on call for absent Members. I wanted to go in order, but I don't see Senator Allen here. So we're going to move over to Senator Jones. Senator Jones, who will be presenting Bill SB 525. Senator Jones, when you're witness and you are ready. Thank you.

Thank you, Madam Chair and Members, would you like. Me to go ahead and start whenever you're ready? Yes. Thank you. Members, I'll be presenting on SB525 and the key word for this Bill is equity.

The measure simply offers equity to the over 500,000 Californians throughout all of our Senate districts who own a manufactured home are also known as a mobile home. Many middle class, working poor and lower income families and retirees that struggle to buy a manufactured home are now greatly underinsured.

For six years I've been working with a constituent of mine, Kent Misich, who will be testifying in just a few minutes. He's just like another 500,000 mobile home owners in our state who cannot obtain replacement value insurance on their homes. We've tried working with the insurance industry, the Commissioner's office and the Fair Plan to no avail.

The Bill does not add anyone new to the Fair Plan, despite the confusion opponents may be stirring up. It simply requires the Fair Plan to offer manufactured and mobile homeowners the option of paying for replacement insurance coverage if they so choose. This is the same equity anyone who else buys a home in California has offered.

Nothing more and nothing less. In fact, even the so called portables that we often see on school grounds or commercial work sites already have the option of getting replacement value insurance coverage. We are simply asking through this measure that the same thing be applied to families who happen to live in a mobile home.

Here today with me coming in from San Diego County today is Kent Misich to share his thoughts on the bill.

Good afternoon Chairman Members. My name is Kent Misich. I am a manufactured homeowner. My story began about eight years ago. My traditional homeowner's insurance policy was non renewed due to my home being located in what the insurer at that time indicated was a high fire area.

I began my search for a replacement policy by contacting multiple insurance brokers and independent companies. All refused to write my home indicating my home was in a high fire risk area. I then looked even further and saw a broker who specialized in insurance coverage with non admitted carriers.

So I was somewhat reluctant to go with a non admitted carrier because we didn't have the State of California behind us on that. But you know, that was all that was available. So they insured my risk for the same cost which included replacement cost coverage.

But a year later they non renewed me with the same excuse as the others is that you're in high fire risk area so we're no longer going to insure you. After contacting multiple brokers again and the carriers, independent carriers, once again they said no coverage for you. We're not writing that risk.

Therefore, I had to take a California fair plan policy. That was the only option that was available for me When I got that policy. Looking at the coverage, I noticed that the agent who provided that policy did not have the box checked for replacement cost coverage. And I indicated where's the replacement costs?

And that agent at that point said no, you got it, it's covered. I said no, it's not. It's not a covered option. We went back and forth and then after I read the policy and further, there was a line at the top that said replacement cost coverage is not available for manufactured homeowners.

I became very upset at that because the only thing available for me was an actual cash value policy. Over the last six years I've been working with Senator Jones and his staff trying to obtain the same coverages as offered before under the traditional homes that are under the California fair plan.

My understanding of the bill as written, it was intended as would require the California Fair Plan to offer manufactured homeowners the option for me to purchase or other homeowners manufacturing like me to purchase replacement cost coverage for the same as traditional housing is offered. This is not an option for additional cost.

When you check that the premium goes up, every little extra item under the California Fair Plan when it gets checked, the premium increases. This bill does not require the Fair Plan to offer full replacement coverage at current cost.

Nor does it require the Fair Plan to subsidize in any way the full replacement cost coverage for manufacturer to mobile homes. The Fair Plan should offer that coverage to manufacturer to mobile homes on an actuarial basis as it does for other properties it insures. I'm not asking for a full replacement at current prices.

I have read the letters in opposition indicating increased cost of the Fair Plan.If this coverage is mandated, it is not mandated. Every time a California Fair Plan policyholder selects that optional coverage, it gets charged a premium. Another contention with those on the Fair Plan would be depopulating the Fair Plan.

That's, in my opinion, is a ridiculous statement to make considering how many times every year I search and search for a policy, not only a regular policy, but a policy that has replacement cost coverage. I can't get it. The same excuse has to be with, well, you're in a high fire area. We're not writing.

We need to wrap it up in a few minutes. Seconds. Thank you.

So basically, excuse me. I am hopeful that the bill as authored clarifies that we want nothing more than just to give manufactured homeowners the same coverages as a traditional policy. Thank you for your time.

Thank you. He kind of spoke past the time, so I'm just going to give you 30 seconds.

I'll be very, very short, I'm sure. Chris Wysocki with WMA and we're here to support SB525. You know, basically for all the reasons echoed, we support the bill. But I wanted just to point out the contrary to a lot of the rhetoric that's out there by a few activist tenant groups.

Mohon park owners actually care about their residents. And that's one of the reasons that we are supporting this bill. They deserve to have access to affordable and quality insurance coverage for their homes. And that's why we're supporting 525. And I'll leave the rest to my letter. So thank you.

Thank you. Now I will move over to anyone in the room wishing to speak in support of the bill. Please come up state. Sorry. Please state your name and your position. Anyone in this room wishing to speak on its behalf. Okay, now we will move over to anyone lead opposition wishing to speak against the Bill. Okay.

Anyone in the room wishing to state their opposition, please come up to the mic. State your name and your position. Go ahead.

Good afternoon, Madam Chair and Members Owed Franco here on behalf of the California Fair Plan. We actually don't oppose the bill. We are neutral. But we did submit a letter expressing concerns. So if any questions should arise during discussion, we're happy to, you know, provide any answers if we can.

Now, we'll bring it back to the Committee for any questions, comments or concerns. Senator Padilla.

Thank you, Madam Chair, and thank the author. I have some experience working for a long time in local government with the association, certainly, and with tenants and the unique disposition that manufactured mobile homeowners find themselves in. It's a very unique situation. It's often a very narrow supply of affordable housing for people on very limited situations.

So perhaps this question is for the author and or through the chair, the staff, but this is not a mandate but an option to purchase optional additional coverage for which a premium is paid. That is correct, sir. And this is available to. And I understand the distinction in California still.

I think there's some vehicle code provisions that still apply to these homes. That's right. Because of the distinct nature of them. But they are mortgage property and they are functioning as somebody's primary residence.

So I guess I'm asking out loud, if it's not a mandate and it's an option to purchase for which a premium is paid, why isn't this distinction not discriminatory? Do you want to address that?

Why is it not discriminatory? Yeah, I'm not sure I understand the premise of that.

Doesn't it appear to be that.

I mean, isn't it.

I mean, the current situation, what is the operational or cost basis for that discrimination? You're talking about the current situation. The current situation.

Oh, absolutely, yeah. The whole. I mean, give me a rationale. I'm trying to. Yeah, no, and maybe I kind of breezed through it too fast. In my opinion, the whole point is to provide equity for mobile home and manufactured homes to what is currently provided for traditional homes.

I understand, I guess, but I'm trying to be a little. I'm trying to understand the arguments around additional costs. I understand the long range goal of the state to depopulate fair. Right. And to get people on front line primary options. But this market is very distinct and has some unique risks assigned to it.

And I guess that's what I'm struggling with, Madam Chair, is I'm struggling with this one because I see some legitimate arguments on both sides, but I also see the inequity very clearly, and that troubles me a great deal.

Senator Padilla, I'm trying to grasp the discrepancy and the inequity that you're. And I think we're talking past each other, not intentionally, I apologize.

My belief and the supporters of the bill believe that this is fixing an inequitable situation in the insurance market now, and just in cases where a mobile homeowner is on the fair plan but, as Mr.

Misch explained, can't get full coverage, we're asking the fair plan to make that full coverage available at the additional premium that they need to charge to make it work. And so we believe this feeds right into fairness and equity and removing that discrimination. Unless I miss.

No, Senator, I apologize if I wasn't clear. I was a little bit rhetorical, but I was trying to get your assessment as the author as to the confusion. What's the root of the confusion? This isn't a mandate. This is an option to purchase at premium. Correct. A product that's available to other homeowners. That is correct.

And I haven't seen data to suggest that we're going to, other than not fully depopulate. I mean, you have a small sliver subset of the California population to which this applies to most of whom are on limited incomes with not very many options. So I guess I'm just trying to find a rationale.

For the bill or against the bill? Against the bill. Oh, okay. That's where we're missing each other. I appreciate that sort of griping out loud. Gotcha.

Gotcha. Okay. We're on the same page now.

Thank you. Yes.

All right. Thank you, sir.

Thank you, Madam Chair. Senator Niello, I appreciate that. I think to get to Senator Padilla's point, I think there's been a sort of a misperception or misclassification of manufactured homes, almost as if people look at them as being motorhomes. Right. But they're not. They're people's actual abode.

And for that purpose, it would be difficult to look at it differently than a regular home. I think there was a reference to some of the automobile references and insurance policies, which really makes no sense whatsoever. And so this is a person's home where they otherwise could be in a wooden stick home, but they're not.

It's a manufactured home and makes perfect sense to me. It there was a statement by either the witness or the author about on an actuarial basis. Obviously it has to be priced accordingly, but the option should be there and I think it makes sense and I'm prepared to move the bill. Thank you, sir.

Wishing to speak.

Go ahead and apologize for coming in the middle here. Obviously a lot of different committees going on today. I think there were some concerns we're discussing a bit earlier around the scope of ADUs and this, you know, what is a house and does this, is this a conversation? I mean, it feels like this conversation.

That absolutely needs to happen. Absolutely. And. But a question of. Yeah, is this, is this the right moment? Essentially? Do we have sort of enough time here to kind of. I guess that's sort of my concern.

I'm certainly open to having a conversation of unfixed, you know, fixed manufactured homes, but it felt like there's just might be opening the window here, you know, way too far and I just not sure to have that. I don't know. What is your response to that?

Well, obviously, to your point and Senator Padilla's point, I think all of us that have served any amount of time up here recognize that the mobile home manufactured home situation in California is a very unique housing and market situation. You know, there's nothing mobile in California about a mobile home anymore for various reasons.

And you know, this is purposefully very narrowly tailored because I do know that I'm tiptoeing into a very precipitous situation both in the insurance market and the mobile home market, two markets that have a lot of work to be done on them.

So it's very narrowly tailored to just require the Fair Plan to offer a product to the mobile home manufactured home owners that is currently offered to school districts that have these modular buildings, commercial operators that have these modular buildings, and traditional homes that people have this ability, this option through the Fair Plan.

So we are creating an option for the consumer to decide for themselves whether they want to pay the extra premium or not to have the additional coverage.

Would ADUs be covered?

ADUs, I think typically in California today are stick built on foundations. So I know there are some cases where there are. Yeah, they're craned in, but I think those are considered permanent features. So I can, I'm not anticipating that being part of this. I can certainly clarify that for you.

Well, because it feels like that would be covered under this, under the sort of square footage.

I think ADUs are covered under the traditional. In a policy with the traditional home that it's attached to.

Well, but we now just passed a law yet like last year or two years ago that they can be sold separately and have their own thing. Their own. Yes. Yeah, I don't know. I'm just.

See you're making my point a little bit about how precipitous this is and how much. That's why this specific bill is very narrowly tailored to do one specific thing.

Yeah, I just want to hear the rest of the discussion debate. And again, this conversation I think needs to be had. I'm just not sure I'm quite there yet. But I'm going to listen to the rest of the conversation. Okay, great. Thank you.

Anybody else? Okay. You know, this is one of those issues that it's very tricky because certainly we all could sympathize and definitely understand the need for it. And I don't think that's the disagreement here. You know, with California just needing so much housing. We've become so innovative as it pertains to what a house is from.

You know, I've seen container homes, I've seen manufactured homes, ADUs, mobile homes and it differentiates. And I think for me what I'd like to see from Mr. Jones is perhaps have this conversation in a much larger, broader way in the Housing Committee where we kind of define or redefine what a house is.

Because I don't disagree that you know, it, it depends on, on the type of housing. And as far as your home serve being designated in a high fire area, this is quite frankly not unique to just mobile homes. As you know, it's an issue that all homeowners are dealing with where they're non renewed and high risk areas.

But right now at this moment, I'm also not prepared to support it. I, you know, I share with Mr. Jones, I really like to have a conversation a little longer on this issue in terms of the difference and why it's not covered.

And I know that we have the fair plan that also has some concerns and I'd like to flesh them out a little further before I can support it. But, with that I'm just going to ask our secretary to call the roll. Thank you. Oh, wait, I'm sorry, would you like to close?

Could I make a comment?

Sure. And if I could just interrupt real quick, if it's okay. Senator Niello, I just had a sidebar with the insurance commissioner and do you.

Mind him asking the question then you can do it in your closing. Would that be okay?

State what you're in.

Go ahead.

And he's Indicating to me that the Insurance Department is going to take an interest in this and support the bill and help us make sure that this makes sense for consumers in California.

And Madam Chair, the point that I was going to make was we just passed out of this Committee, though I abstained, a bill that admittedly needs a lot of work. And what you're suggesting is, from your perspective, this bill may need some work. It's not an entirely different situation.

I don't see a problem with passing this one out. I have a better feel for what this bill does than I did the other bill. And so I am prepared to support it. But the point that I'm making is we provided the allowance to another bill that needs a lot of work.

Perhaps, particularly given the comment of the insurance Commissioner, perhaps we should allow this bill that same opportunity.

And I would like to also invite the Fair Plan to come and share some of the concerns that they have expressed on this, some of the issues that this bill brings. Can I invite Armand or you can just.

Armand Felicia, on behalf of the Fair Plan, the overall concern is the expansion of the Fair Plan. That still is an issue.

Obviously, the Fair Plan is supportive of playing its role in the market, but at this point considering depopulating the Fair Plan, which is part of the sustainable insurance strategy, they're trying to work with folks to get that done. And by adding, I don't know, you said 500,000 more.

There's 500,000 mobile home owners. That doesn't mean they're all going to be on the Fair Plan.

Right. But fact of the matter is you. Add replacement cost and, you know, folks are going to likely stay at the Fair Plan. Surplus lines is available from my understanding. So that is an option. Again, the Fair Plan has no position. On the bill, but the fact of the matter is you just want to.

Be mindful that there's a middle issue of trying to, you know, get the Fair Plan in a state that's, you. Know, it's not stressed so much.

Thank you. And it is at this point, it is true that they can go in the admitted market surplus line and the Fair Plan. And I do agree that right now, in order to, we've been trying to depopulate the Fair Plan, doesn't mean that we don't think that there's coverage here to be done.

But I still do think that we need to flash it out a little further because again, the Fair Plan should be the insurer of last resort. And I appreciate the insurance Commissioner coming to have this discussion. I Have another question by Mr. Padilla. So I'm going to turn it over.

I know that this is a very personal issue to so many of those that have mobile homes. And again, this is an issue that's happening across our state, not just in mobile home, but for everyone else as well. So let me just turn it over to Mr. Padilla. You have a comment?

Yes, Madam Chair. And thank you for your work in this space. And I know we're all trying to get to a good place and it's not simple, as you point out quite correctly.

I think it's important not to lose sight of the fact that if we're going to have a sure of last resort provision which has been well established for many, many years and for a reason, that we make that availability last resort or not, in an equitable way, and one that is not, in my view, just to be blunt, I think the status quo here is frankly discriminatory.

I think it's important to not lose sight of the fact that mobile home and manufactured homeowners in California occupy a very unique space as homeowners in quotes, they purchase the home itself, but they don't own the land upon which they rent space from. And that puts them in a unique position.

And that's been recognized by jurisdictions up and down the state at local and regional government with respect to rent controls and reviews, something I'm very familiar with in San Diego County. So they are in a very unique position. It is mortgage property. It is their primary residence. It is their home.

It has been that way and been recognized as such for decades in this state. So this is a sliver of our population that we can't allow a status quo to remain that is frankly inequitable. And I don't know, the fact that there are other avenues to obtain front or second line indemnity products is relevant here.

This is about what's available at a premium if someone so chooses. I know the Commissioner's office is working hard internally on the reg side dealing with some of this unique, the unique posture of these folks in California. And he's shown great leadership in that regard. And I think this is part of that conversation.

And Madam Chair, I would just respectfully say that I think in order to keep the conversation moving, I hope we can move the bill along to give the author that opportunity. Thank you, sir.

Anyone else? Well, thank you. And Mr. Niello, I do appreciate your comments and you know how much I respect. But you know, you're right. However, the previous bill that we were discussing was basically dealing with the admitted market. My concern right now is a Fair Plan.

Equally important is, you know, all the calls that we're getting over, you know, how expensive it is, how high it is and how stressed it is. And we are living in a very difficult time right now. And so for me, right now, it would require a little bit more conversation.

Again, I don't disagree with any of my colleagues, but I do think it's very different from the Fair Plan that has increasingly become the insurer of first resort when it should have just been an optional, when people couldn't find insurance.

And, you know, with all the fires that are happening, everything that's happening in the past 567 years in terms of the most, you know, deadliest, costly wildfires, everyone seems to be on the Fair Plan. And to me, that continues to be a concern that I, for me, like to continue to have a conversation on.

And with that, I will leave it at that. Mr. Jones, would you like to close before we call the roll?

Thank you, Madam Chair. And I want to thank Senator Padilla for very eloquently closing for me. And I will add just a couple of things to that real quick Number one, my staff did confirm that ADUs would not be impacted by this bill, Senator Becker, if that is a major concern of yours.

And then just quickly, Madam Chair, you very eloquently articulated the challenges at the 30,000 foot level with the insurance market here in California. And there's obviously lots of discussion that we can have about why we are where we are with the Fair Plan being the first choice for too many people. I think we all share the goal.

It's a bipartisan goal, nonpartisan goal, actually, of depopulating the Fair Plan. We have to do that. That is the long term goal and actually it should be a short term goal as well to depopulate that as much as possible. Regarding this bill.

Specifically, we're not envisioning a large influx of new clients to the Fair Plan because of this bill. What this bill is simply envisioning is that the current people in mobile homes, manufactured homes on the Fair Plan will have the additional option of paying for the additional coverage as an option. They don't have to choose it.

They have to make that financial decision for themselves, whether they can afford it or not. I would ask the chair to please vote for the Bill today, let it move forward, and we will continue the robust discussions of all of us.

Obviously, I see on the committee as well, the insurance commissioner has indicated he's going to engage on this. I think that's already good news. And we will make sure that this committee is, you know, updated as those conversations go on and would offer the same parameter that you put on the last bill.

If anything's happening to it that you don't like, call it back and let's have another discussion here at the Insurance Committee on it.

Thank you. And with that, Secretary, please call the roll. But I really want to say thank you for this discussion. I know once again, I just want to reiterate that the insurance market right now is, you know, something very specific and special in light of everything that's happening.

And so for me, like I said, the Fair Plan continues to be a really big concern. And I appreciate the colleagues and everything that's been explored press, but again, I still have a little bit of concern in terms of the growth and, and what's happening in the Fair Plan market at this time.

So thank you for the discussion. And Madam Secretary, call the roll. Is there a motion to move the bill forward? Mr. Niello moved the bill.

[Roll Call]

We're going to leave that on call for absent Members. Thank you very much. We will now move on to our next Bill. Do we have Mr. Allen? Senator Allen. We're going to hear SB495 by Senator Allen.

Good afternoon, Madam Chair and members. I'm proud to present SB 495 alongside our joint author and unfortunate sister in tragedy for me as we both experience the horrors of the fires in both of our districts in early January. And we're also really pleased to be joined by our Insurance Commissioner, who's here sponsoring all these bills that are coming before you today. We all know how much these terrible Palisades and Eaton fires decimated the communities of the Pacific Palisades, Malibu, Altadena, portions of Pasadena, displacing thousands of families.

And now these families are working through the very difficult process of filing claims with their insurance providers to replace lost belongings. Now, under current law, the homeowner who experiences a total loss in disaster may receive a payment of 30% or up to $250,000 of the coverage limits of their policy without an itemized claim.

But to receive the remainder, homeowners are required to undergo a really tedious and in many cases traumatizing task of creating an item that is itemized list that includes the estimated value, age and condition of every single item lost in the disaster. And still many insurers will only pay the depreciated value until the homeowner repurchases and submits receipts for each item. Additionally, some insurers require policyholders to submit these lists and proof of loss within 60 days of the destruction.

You know, while some have just said we're going to provide 100% of the contents coverage that you've already been paying for, but for those that have had more difficult insurers, this has proven really unrealistic for policyholders experiencing loss in these wildfires because homeowners were prevented from even accessing their property for nearly a month.

In the case of the poor folks in some of our mobile home parks, even that access has not been something at all that they've been able to get because they don't literally their property was just the, the building on top of the land. And of course, we also know that in other areas, it was simply too unsafe and hazardous for people to return. So this bill is seeking to address this issue by requiring insurers to cover 100% of the personal property coverage limits without requiring the policyholders to complete a content inventory.

It extends the period of time for policyholders to submit proof of loss to 180 days in the event of a declared emergency, with the potential for additional six months extensions for reasons outside the policyholder's control. And then it gives the Department of Insurance the tools to collect catastrophe modeling data from Insurers to understand risks in the insurance market. Let me just repeat here this. We are asking the insurers to pay for the contents coverage that the folks have already been paying for only in cases of total loss.

And I hope most of you had the opportunity to walk either of the neighborhoods that we represent just to see how catastrophic these places are. There's nothing left to these homes. Someone said to me when I was first in a press interview, oh, well, then this means that people will have to itemize all the items in advance before being sold this product by the insurance company. And I said, you know what? That's a lot better than doing it after the fact.

At least at that point, there's an arm's length negotiating relationship between the person who's considering buying this additional insurance product or not, as opposed to after the fact, when they've literally lost everything. They're trying to figure out where they're going to send their kids to school and what they're doing with their business and how they're going to rearrange their whole lives. And now they have to sit back and drop this itemized list, trying to pour over every possible photo they have from their phones. Again, this is not.

This is stuff that they've. This is contents coverage they've been paying for. Nobody pays for more contents coverage than the items of value in their house. And certainly the insurers, you know, the insurers have been taking their money off, agreeing to pay up to that amount as part of the insurance policy. And that's all we're looking to have covered here. I'm just proud to be here with joint author and our colleague Senator Perez.

I just, you know, want to reiterate, I think what Senator Allen's already shared, you know, SB 495. So many of my constituents are just asking to see this passed. You know, this process of having to itemize all of the items that you've lost is incredibly traumatizing.

I was just talking to, and I know Senator Rubio, we had the pleasure of meeting with Victoria Knapp from the Altadena Town Council. She is the President of the town council there. She just finished doing this process and was just expressing to me, you know, how painful it is, right.

Having to reflect on all of the personal and cherished items that have been lost and things, many things that frankly just can't be replaced. So it has been so difficult and some folks have just chosen not to go through the process because of how painful it's been. But I do think this is really necessary.

You know, so many folks have just asked for this to be resolved and, you know, just really appreciate the author and Senator Ben Allen and all of the work that he's done on this, as well as our Insurance Commissioner Ricardo Lara, who's just taken on this tremendous job. So thank you. And urge an aye vote.

Thank you. We will now move up to your lead witnesses. We have four minutes total. Both of you will be speaking. You'll have four minutes.

Thank you. I won't be that long, Madam Chair, and I appreciate your time. What you've heard from Senator Allen and Senator Perez is the most recent iteration of what fire survivors have to go through, as this is now the 110th catastrophic wildfire. So this is what families have been doing since the fires really started, since 2017.

The goal is really here to simplify the process for Californians who are already facing, as Senator Allen said, this traumatic experience. Additionally, it also requires insurers to provide my department with annual reinsurance and catastrophe model data for policies written in California in the previous years.

This is important now because as you know, in the sustainable insurance strategy, we are now going to allow reinsurance and cat model trends to now be used in the rate files. So we want to be able to capture that data to be able to understand how the use of these models and reinsurance are affecting and to see of any potential trends. Currently, we don't have access to that data. So that's important that we do that as well.

In February, as part of an effort to protect consumers following the LA fires, I encouraged insurers to go beyond the existing law and offer up to 75% to 100% of property personal property coverage limits as we do after every catastrophic fire. And similar to past events in 2018 and 2019, most insurance companies responded positively.

I acknowledge that the insurance industry have submitted a letter in opposition raising concerns that requiring insurers to pay 100% of the personal property coverage after a home is destroyed is declared in a declared emergency could increase insurance costs. But as Senator Allen said, this is money that they've already paid that consumers have.

And I believe this provision, again, is essential to ensure that policyholders receive the personal property coverage that they've already paid for. Cutting through the red tape during such a traumatic experience and expediting these claims is what policyholders need at that moment so that they can rebuild and make those financial decisions that are imperative after a catastrophe.

My department has engaged with industry representatives and will continue these discussions to understand and further address their concerns. And if you have Any further technical questions, I have Tony Cignarale with me, my Deputy Commissioner for Consumer Services and Market Conduct. I respectfully asked for your aye vote.

Thank you. And now I will invite anyone in the audience wishing to speak in support of this bill. Please do so at this time. Okay. Please state your name and your position. Thank you.

[Unintelligible] for Kim Stone of Stone Advocacy on behalf of the sorry.

Consumer Watchdog.

Okay, thank you. Thank you everyone for helping out. I will now invite the lead witness opposition to come join me. Go ahead. If you both will be speaking, each one of you will have two minutes and I will warn you when you hit the two minute mark. Thank you.

I know you will.

You may proceed when you're ready.

Thank you. Good afternoon, Madam Chair and members. Seren Taylor on behalf of the Personal Insurance Federation of California. I do want to say the CDI has about a dozen sponsored bills this year and we are in support of most of them. Unfortunately, this isn't one of them.

While SB 495 seems to be a well intentioned effort to put more money into the pockets of policyholders that experience a wildfire loss, it will result in the unintended consequence of mandating major overpayments that increase the cost of insurance for all Californians.

And I think there's a little misunderstanding between the author and and of how insurers price these policies because people are not paying for 100% of their personal property coverage. So that's a little inaccurate. The reason for this is because the current insurance underwriting process where the insurer gathers information to assess the risk of a specific property and determine the price of coverage that's focused on coverage A, or dwelling coverage, which covers the physical structure of your home. Think the walls, the roof, and the floors.

However, with personal property coverage, known as coverage C, think about furniture, clothing, electronics, insurers use a standard formula to arrive at a policy limit that is high enough that even outlier policyholders with above average personal property can claim their full losses. Because insurers do not estimate the value of personal property when they issue the policy, the coverage C amount is an upper boundary that is much higher than most policyholders will ever need.

Thus, by mandating insurers to pay 100% of this upper limit for every major disaster, this bill will force insurers to increase premiums to cover the cost of losses that a homeowner did not experience. SB 495 eliminates insurance any checks and balances to ensure that unjustified overpayments do not occur. It doesn't even make sense to have a personal property coverage limit, but then require insurers to pay 100% without doing any validation. That's a recipe for disaster. That's not sound policy.

I'll just say that in 2020, the Legislature debated the same issue and struck the right balance between simplifying the process for policyholders and ensuring that we don't legalize fraudulent payments. And that's what we're dealing with here. So SB 495, that will upend that carefully crafted policy, which was, we think, demonstrated to work well for consumers. And so we respectfully ask for your no vote and also to work with the Commissioner and the author to make any adjustments as needed. So thank you.

You're going to have less than a minute and thirty seconds. You may begin.

Mark Sektnan with the American Property Casualty Association in opposition to the bill. I want to say myself with several of the comments made by Mr. Taylor, but I also want to point out a couple of things. This bill turns insurance for property coverage from a replace what you lost into a grant.

There will be a set amount. It will have no reflection on what you actually lost. And we believe that in itself is problematic. The existing law that Seren talks about, for $1 million in coverage A would provide somebody with $300,000 in personal property coverage without an inventory. There is an option to go higher if you believe you do have additional losses.

That is an extremely generous amount and probably more than a lot of people would have. We also point out, it's our letter, how this would have different implications for similarly situated policyholders depending on what their policy says. Somebody who has a 75% coverage would get $750,000.

Where somebody has 40,000 or 40% will only get $40,000. That's not fair. And so what we want to do is if in fact, and we do not believe that the these policies have been priced to pay out maximum benefits each time, that would be a much different equation.

And if that is the intent of the Legislature, then we need time to reset the policies to reflect the intent of the Legislature. I'll also point out that companies are aware of the challenges of inventories, particularly after wildfire, and they are developing a lot of tools that are much easier for consumers to use and much more intuitive.

Okay, I need you to wrap it up.

I did.

Thank you. Thank you. Now, I would invite anyone in the audience to that wishes to oppose the bill to step up. Please to state your name and your position. Thank you.

Shari McHugh representing the Pacific Association of Domestic Insurance Companies in respectful opposition to the bill. Thank you.

Thank you. Anyone else wishing to speak? Okay. Seeing no interest, I will now bring it back to the committee. Any members have any questions, comments, or concerns? Senator Niello.

Thank you. Through all of this discussion about the horrible wildfires in Southern California and other terrible mass fires that have occurred, I haven't talked much about my own personal experience because it was just one house. My whole neighborhood didn't burn down. So I can't fully empathize with the stress and the tragedy of those fires.

But I well understand this particular topic. And number one, my house burned down my home about, gosh, 40 years ago now. And it was a horrible experience, extremely stressful, traumatic. I do not commend it to anybody. But with regard to the circumstances afterwards, I was not rushed into creating a contents list.

The insurance company, maybe I had a better insurance company and all the other insurance companies are not like that. But I had as much time as I needed to create a list of the loss, and I had no misunderstanding about the nature of the contents coverage. I didn't come anywhere near it.

I didn't have that much contents in my house. It was an allowance that is calculated, the industry standard, based upon the insurance value of, of the home so that there would be a high enough ceiling so that if I had much more contents in there than anybody else might have in the similar circumstances, there's still the room to pay for it and it's factored into the premium.

And so with my experience, as I said, I wasn't rushed. The insurance company allowed me the time. I even joked with him about it. I told him I had a Hatteras yacht in my garage and he was going to replace that. No, just kidding. But the point is, he allowed me the time to create that list.

It was probably at least six months, maybe more. But in any case, it's built into the premium. And I'm concerned that if we pass this bill, we're going to fundamentally change insurance policies, homeowners insurance policies from this point forward.

Contents will not be looked at to provide an upper limit to allow people the room to claim their contents. I realize that going through that process of developing the list is difficult. It certainly wasn't easy for us, became a sort of a family exercise to try to remember what was in what rooms.

That's no fun. But if we pass this bill, the nature of contents coverage will fundamentally change. It won't be the way it is now, and if it is, the cost of the premium will go up if somebody's going to have an upper allowance for contents and the presumption is that once there's a total loss of the house, it's going to pay that amount, the premium is going to go up because the risk is higher. So I just don't think this is wise policy.

Thank you, Mr. Niello. Anyone else wishing to speak? No. Well, first of all, thank you. And I just want to share that I have toured extensively Altadena, that's my neighboring cities, as well as Palisades, going back to 18 and 19 when I toured the Woolsey fire with Senator Stern, Paradise.

I mean, this has been an ongoing, you know, our new normal, so to speak. And so I do sympathize with all those that lost their contact. Since I had the opportunity to speak to the town council. I mean, pretty much that entire community is gone, gone to the ground.

But I want to just give the Insurance Commissioner an opportunity to respond or give me your thoughts on what was said right now, which may provide an opportunity to the way it was framed, legalize fraudulent claims. Is there anything that you want to share in regards to what was stated?

Well, on the fraudulent piece, I'll just tell you we haven't changed any other statute that says that if there's any suspect, anybody suspects any type of fraud, then the insurance company does not have to make the payout. We're not. That's already in statute.

But I'll have Tony Cignarale kind of further give you, since he is the expert in this area.

Thank you, Madam Chair Members, Tony Cignarale, Deputy Commissioner for Consumer Services with the Department of Insurance, a couple of issues to raise. You know, first of all, as Mr. Sektnan mentioned, that a person with $1 million of coverage would be eligible for 300,000 under the current law.

That, you know, just a slight inaccuracy there, because there is a cap of 250,000 in the current law. So there is a cap at 250, which is affecting many of the higher homes, especially in Palisades. They certainly have more than $250,000 in personal property.

With regard to the alleged inequity concern by the industry that people have different default levels of coverage compared to their neighbor, that sort of thing. From our point of view, that's really an alleged concern. From our point of view, because all policies have different levels of coverage.

Two neighbors generally don't have the same amount of coverage depending on which insurance company they're with or how much coverage they ended up purchasing or when they purchased their coverage. And so this, we believe this would be no different in terms of creating an inequity. We don't believe an inequity will exist under the proposed bill.

We also found that, you know, contrary to exceptions such as Senator Niello, many survivors, especially in this environment, after a wildfire, that have gone through the burdensome process and have been able to remember everything they had, video and photographs, that sort of thing, many of them did hit their policy limits and some of them went over and above their policy limits. And so it's merely a mixed bag. And so it's not every case, as the industry would portray it, that this is the upper end. It really depends on the situation.

And we expect insurance companies, if this bill passes, just as they did when this current law was enacted, to make the necessary adjustments both in terms of fraud prevention, which we would support, as well as their underwriting practices to ensure that they're not over, over, over putting policy limits away over and above what the consumers may have in their homes. And so we expect changes and adjustments to be made in that regard.

Thank you. And so to be clear, again, I do kind of understand that that fraudulent piece, but as the Insurance Commission has stated, so it's very clear that if there is, if it's suspected, I mean, for the lack of better analogy here, so if it's a car with a few contents and they're claiming $1 million, it' when something is fraudulent and then you have the ability to not cover it or go after these individuals.

But you know, Seren, and I'll give you a chance to discuss since I gave them the opportunity to share, you want to share a little further about that fraudulent. They're saying that you're able to go after these individuals.

Thank you, Madam Chair. Well, I would just say that. And the National Association of Insurance Commissioners talks about there's hard fraud and soft fraud. And soft fraud is when folks sort of exaggerate the cost of a claim. Right. They didn't create the problem just to get paid, but they exaggerate the cost.

And so our point here is that when you mandate 100% of a payment that exceeds what is the actual contents, you are in fact legitimizing that type of soft fraud. So you're not going to be able to go after someone for this because now the law is saying they are entitled to an overpayment.

You know, and certainly to Senator Niello's point And to even Mr. Cignarale's point, you know, they are correct in that we believe certainly this will change behavior for each action, there's an equal and opposite reaction. And certainly this would force insurers to relook at how do they do the personal property now?

You know, for example, right now the intake process for the application is focused on the cost of the dwelling. That takes several hours. And that's why for ease of consumers, there's sort of been this. Don't worry about the inventory right now. We're going to give this range to work within and hopefully we'll never need it. But if we do, then we'll work it out.

And can we wrap it up?

Oh, yeah. Well, just to say that, you know, this could force insurers to say, okay, we're going to spend two days up front getting an inventory of your home and then that's the price you're going to get locked into. And by the way, five years from now, if you don't update that, that's what you're going to get. And then we're going to be back here five years from now hearing from people who are underinsured on their personal property coverage.

So let me just, you know, because I have to move on to the next bill. But I just wanted. So you still have the ability to go back to the drawing board and figure out how to protect from fraud? Correct?

We would ask, then there'd be a delayed implementation date to allow insurance companies do that. And I'll just leave you a quote from former Insurance Commissioner John Garamendi, who lectured me endlessly that anytime an insurer pays more than it's actually required, that is actually replaces a loss. That's fraud.

Well, you know, like I said, I know that I've been very diligent about visiting some of these impact areas. And it's hard when you hear the stories of these individuals who have struggled not only with the loss of their home, their memories and so much.

And I also agree with Senator Allen and Perez, that we need to do what we can to make it easier to be able to at least overcome such tragedy. And I'm hearing the Insurance Commissioner stated very clearly that if there's clear fraud, you know, they can definitely not pay out and go after them.

And I heard from you, Seren, that there's an ability to, to figure things out, to put more, you know, maybe safeguards in place to make sure that fraud doesn't happen. So with that, I will just ask Madam Secretary, please. Someone move the bill? Moved by Senator Padilla. Please call. I'm sorry, Senator Allen, would you like to close?

Well, I do want to work with the opposition. I know the Insurance Commissioner does as well. You know, there's just some fair issues I think that have been raised. Maybe it'll lead to different new products that will be more transparent for people. So, but so with that, I certainly want to see the bill move forward.

And I think this is an immensely important issue that we've got to at the very least tweak the status quo. And certainly happy to work with the opposition on where we can land this. But with that, I respectfully ask for an aye vote.

I appreciate you stating that you're still willing to have further discussions. Madam Secretary, please call the roll.

[Roll Call]

That bill will remain on call for absent members. Thank you, Senator Allen. Next we will be hearing from Senator Perez. SB 547, a commercial property insurance cancellation and non renewal. Senator Perez, when you're ready, I'd like to invite your lead witnesses as well to stay and join us. You may begin when you're ready. Thank you.

Thank you. Thank you and good afternoon, Madam Chair and members. First of all, I want to start by thanking Senator Rubio for joint authoring this bill with me and thanking the committee staff for your incredible work on SB 547, a bill that is sponsored by Insurance Commissioner Ricardo Lara and is part of the Senate majority Senate's major wildfire legislative package, the golden state commitment.

SB 547 will expand the residential insurance moratorium law protections to include commercial insurance properties. Existing law prohibits the cancellation or refusal to renew residential property insurance policies for residential properties located in a zip code within or adjacent to a fire perimeter for one year after a state of emergency is declared.

This existing gap in state law was depicted in the devastating impact that the 2025 January wildfires not only had on residential properties, but on commercial properties in my community as well. Among their devastation, the Los Angeles County Fires destroyed more than 18,000 homes and structures.

Of those total structures, nearly 5,000 are commercial buildings that are susceptible to sudden cancellation or non renewal of their insurance policies. The estimated impacts of widespread commercial coverage loss will be astronomical. Among those commercial properties impacted, that includes an estimated 1,863 businesses employing an estimated 9,610 workers that generated $1.4 billion in annual sales.

So this is a huge economic loss for these communities. The Los Angeles County Economic Development Corporation Institute estimates that the wildfires could result in up to $10 billion in total economic output impacts over five years in the seven county Southern California region affected by the fires.

These small businesses, nonprofits, and other entities that have commercial insurance not only contribute to the local economy by generating revenue and infusing tax dollars into the city and county, they serve the community and are an integral part of the process to restore the neighborhood to how it was before the disaster struck.

Expanding these same protections to commercial properties will safeguard businesses, homeowners associations such as HOAs, condominiums, affordable housing units, small businesses, nonprofits and other commercial entities from having their commercial insurance policies non renewed or canceled for one year following an emergency declaration.

Just like residential homeowners, holders of commercial insurance policies need and deserve reliable insurance during a disaster like the wildfires we've just experienced. SB 547 will expand the one year moratorium to prevent cancellations or notices of non renewal on small businesses and nonprofit organizations protecting this valued and essential part of the community.

I also want to note that we are actively engaged with all stakeholders, including the American Property Casualty Insurance Association and the Pacific Association of Domestic Insurance Companies. I'm committed to continuing these conversations and working with these groups to address their concerns as the bill progresses.

Today with me, I have Insurance Commissioner Ricardo Lara to speak in support and help answer any technical questions.

Thank you, Senator. I will now invite the lead witness to speak again. You have four minutes. Thank you.

Thank you, Senator. Again, you heard what the bill does. During my tenure, my department has issued 36 residential moratoriums covering over 4.4 million policyholders affected by over 110 catastrophic fires throughout our state. These measures have provided families and homeowners the time and the support they needed to recover.

This bill supports commercial policyholders at a time when stability is crucial. The number one question I get after these fires about the moratorium are from the local chambers of commerce, from the nonprofits, from the firefighters themselves that are trying to rebuild their fire stations and have lost their coverage. So it's time that we provide them that same protection. We know that if Main Street can't rebuild, the entire city suffers and the entire town.

So this will give them the appropriate protection that they need, allow the market to stabilize and allow them to rebuild without having any fear of losing their business because they can't access insurance coverage. So I respectfully ask for your aye vote.

Thank you. And you're there for support. I would like to now invite Members of the audience to speak in support. Please state your name and your position. Thank you.

Good afternoon, Madam Chair, members, Robert Harrell, Executive Director of the Consumer Federation in support. We would even urge expanding the one year moratorium.

Right now we're not having testimony. I'm sorry. Thank you. Please just state your name and your position. Appreciate it.

Good afternoon, Stacy Heaton, Rural County Representatives of California in support.

Thank you.

Shira Spector for Stone Advocacy on behalf of Consumer Watchdog in support.

Thank you. Is there any lead witnesses in opposition? Please join us here at the table. Thank you. You have four minutes. Thank you.

Thank you. Good afternoon, Chair Rubio, Vice Chair Niello, members of the committee, the author. My name is Denni Ritter. I am here today to testify on behalf of the American Property Casualty Insurance Association or APCIA. We're here to testify respectfully in an opposed unless amended position to SB 547. We do believe that there is a path forward.

We do understand the author's desire to protect commercial policyholders following a disaster. But we are also very concerned about the unintended consequences of this bill and that it could have on the commercial insurance marketplace. Commercial insurance risk is vastly different than residential insurance risk.

Commercial risks often include special considerations due to the type and use of the building contents, manufacturing inventory values insured, theft issues and liability related to the premises. Insurance policies in the commercial space are inherently much more complex than residential policies, often with significantly higher values insured.

This bill would restrict our ability to determine when to write or renew such exposures after disaster and will likely exacerbate existing insurance availability issues. If an insurer cannot manage their risk concentration in one area of the state under this bill, they may be forced to non renew properties outside of these emergency declaration zip codes.

And additionally, and I think this is something we've talked to the author and the sponsors about, because commercial risk exposure can change quite substantially, it is incredibly important that this bill clearly allow for insurers to cancel or non renew policies where there has been a material change in risk.

We can provide examples, but the bookstore that decides to start selling pizza. The difference between a retail risk and a restaurant risk is incredibly different. And I think we're very concerned that insurers not be expected to cover risks with which they don't have any loss experience for. That's not within their area of expertise.

We would also offer that there's been a lot of discussion about this legislation helping homeowners associations, condominium complexes, affordable housing units, among others, as the commercial properties they are hoping to protect.

We would propose thus that there be a consideration to narrow and tailor the bill to cover commercial habitational risks so that we're able to ameliorate some of the broader commercial effects that we're concerned about. For the above reasons, we are respectively opposed and we have provided amendments for everyone's consideration. We really do look forward to continued conversations.

Thank you. At this point, I would like to invite those in the audience to come and speak in opposition. Please state your name.

Good afternoon, Shari McHugh, representing the Pacific Association of Domestic Insurance Companies. We are respectfully opposed to the bill unless it is amended to narrow its scope. And we look forward to working with the author. Thank you.

Thank you. Anyone else wishing to speak? Okay, I will now bring it back to the committee members. Anyone wishing to make any comments? Mr. Niello, I thought you were going there.

Well, question about the opponents points and what you might have to say about that.

We've been having active conversations with them. I know our staff has met so that we can try to figure out how we resolve some of the issues that they raise, particularly with, you know, businesses potentially changing what their business model might be into entirely different businesses. You know, I do want to highlight that this is, you know, focused on areas that are impacted by fires.

Many of the businesses, small businesses that burned down in my community. I mean, they're having trouble just getting access to water to get business functioning again and definitely are not going to be able to make that transition to completely change and pivot to a completely different business. So understand the possibility of this concern.

And so we're working on navigating that. And I know the Insurance Commissioner has been a part of those conversations as well. I'm not sure if you'd like to add anything.

Senator Niello, I think we, I think, you know, as we move the process, we can, I think we, we can get to a consensus. We definitely don't want to create any unintended consequences and understand the nuances of, you know, the complexities around commercial policies. So, you know, we understand. I think we're all trying to get to the same place.

Thank you.

Anyone else wishing to speak or any questions up in the dais? Well, thank you. And, and I want to thank Senator Perez. I mean, I think she started her conversation with I will continue to have conversations. You know, I had an opportunity to have discussions on this issue and I can see those unforeseen changes in business models.

I mean, I could think of one specific bill that we passed, I believe last year where we, I didn't vote for it, but now we have these cannabis companies that a bill was passed that now allows them to sell food and drinks. And so it's become a totally different model than just, you know, selling a product. Now it's becoming a restaurant. And so I think some of the concerns were stated is it's hard to foresee these changes.

But you know, I'm also encouraged by the commissioner who also stated right now, I mean, I think that through the lens that we want to see insurance today is to ensure that the unintended consequences is not minimizing the affordability factor as well as the availability factor here, which is something that we all have to navigate and make sure that we're not causing, as I think I heard you state right now that you may do it, but then the people in that area may not have the available insurance because you have to cover that risk that has become greater than what you expected.

But either way, I am a proud coauthor and I think it's something that's important. Again I have toward Altadena and just the devastation to businesses. But you also brought the other issue of commercial habitational insurance for condos and which I think is also the intention of the author and what I think the Insurance Commissioner also wants to tackle. So I think we're all at the same place year and the conversations will continue per the senator, per the Insurance Commissioner.

And I look forward to seeing what this, what transpires through these conversations and that you guys can get to a good place. And with that I will move the bill forward. Madam Secretary, please call the roll. I've been skipping this today, but would you like to close? Yeah.

So I respectfully ask for your aye vote. Thank you.

Thank you. You may call the roll.

[ROLL CALL

It's 4-0. It will remain on call for those members that are absent. Thank you so much, Senator, and everyone that that testified. We have a couple members that are still absent. Give me one second.

We do have Members that came in and out, so I'm going to start calling the row and wait for everyone else to join us. If you can just please say that we will be closing soon, so get the Members down. We will start. Can you please call the roll? On consent calendar.

[Roll Call]

Padilla. Okay, that will remain on call. We will now call item 1, SB2 60. Madam Secretary, please call the roll

[Roll Call]

That Bill will remain on call. We will now move to item two, SB360. I'm sorry. We file. Remove that from the item. We will now move on to item SB495. Please call the roll.

[Roll Call]

That Bill will remain on call for absent Members. We will now move on to SB 525. Please call the roll.

[Roll Call]

The vote is 4-0. It will remain on call. We will now move on to SB 547. Please call the roll.

[Roll Call]

The vote is 5-0. It'll remain on call. I believe we are missing a couple of Members.

I will call the roll. Senator Wahab has just joined us. We will call the roll and wait for absent Members. We will start again with SB260.

[Roll Call]

That bill's back on call as we'll move to the next item. Madam Secretary, please call the roll.

[Roll Call]

Vote is 4-0. That Bill is out. We will now move on to the next item. Okay, so Senator Wahob, I think you're on everything. Yes. Thank you. We are missing some Members that are currently presenting in health, so we will take a short recess.

We're just going to reconvene to state that bill SB260 is out 5-0. And we will take a break to wait for two Members who are presenting at this time.

We're just going to reconvene for a second. We are going to move the consent calendar out 6-0. And we're going to break for Senator Becker, who's presenting. We are reconvening the Senate Insurance Committee. We have now been joined by Senator Becker. We'll call the roll on SB495. Madam Secretary, please call the roll. S

That Bill is out 5-1. Excuse me. We will now mve on to SB 547. Senator Perez, please call the roll. That bill's out 60. Now. The Insurance Committee is now adjourned. Thank you, everyone, for joining us today.