California Eyes Streamlined Home Insurance Payouts
California is on the verge of potentially passing legislation that would significantly alter how home insurance claims are handled after a disaster. The proposed law, put forward by the state’s insurance commissioner and several legislators, would compel insurers to pay homeowners the full coverage amount for lost belongings inside destroyed homes.
This move would eliminate the often mentally taxing process of itemizing every lost possession, a requirement that many insurance companies currently impose. Consumer advocates argue that this requirement only adds to the already significant trauma faced by those who have lost their homes.
If enacted, this California law would set a new standard, making it the only state in the nation to mandate 100 percent payouts without the need for itemization. Other states, such as Oregon and Colorado, have implemented similar measures following catastrophic fires, requiring insurers to pay a percentage of the coverage limit without an inventory. For example, in Oregon, this percentage is 70%, and in Colorado, it’s 65%, according to Emily Rogan, a senior program officer for United Policyholders, a consumer advocacy group.
“The idea here is, we say, ‘Look, this is the insurance plan that you own. You have a total loss, and we’re not going to require you to draw up this itemized list in this moment of incredible pain and vulnerability,’” said State Senator Ben Allen.
California Insurance Commissioner Ricardo Lara, the bill’s sponsor, and Senator Ben Allen, the bill’s author, clarified that the legislation would specifically apply to homes completely destroyed in a disaster. The bill calls on insurance companies to pay the full contents coverage without requiring an inventory from the homeowner.
Commissioner Lara emphasized the dehumanizing nature of forcing homeowners to meticulously list every single item lost in their homes. He was moved to name the bill “Eliminate ‘The List’” after reading a New York Times article detailing the experience of a homeowner in Altadena, California, who attempted to itemize every possession lost in a fire. Lara stated, “It’s hard to describe the agony in people’s faces.”
This legislative push follows a bulletin issued by Mr. Lara a week earlier, appealing to insurance companies to voluntarily pay 100 percent of contents coverage for homes destroyed in recent fires. While that notice did not hold the weight of law, the Commissioner said that “it’s clear that we need to go further,” noting that this decision was based on the Times’s coverage and direct feedback from affected homeowners.
