An act to amend Section 14085 675.1 of the Insurance Code, relating to insurance.
Summary
AB 2038 makes two changes to the Insurance Code, with the main policy change focused on residential property insurance after wildfire-related losses. First, it extends the period during which insurers must continue offering renewal coverage after a total loss to a home caused by a disaster from two annual renewal periods to three, and raises the minimum coverage period from 24 months to 36 months. Second, it lengthens the wildfire moratorium on cancellations and nonrenewals for homes in ZIP Codes within or adjacent to a fire perimeter from one year to two years after a state of emergency is declared, so long as the cancellation or nonrenewal is based solely on the wildfire location and not on other permitted grounds.
The bill also preserves existing exceptions that allow insurers to cancel or decline renewal for reasons such as willful or grossly negligent conduct by the insured, unrelated losses that make the risk ineligible, or other physical or risk changes that render the property uninsurable. In addition, the bill includes a separate section making technical, nonsubstantive changes to the crop insurance adjuster licensing statute, without changing the underlying licensing framework.
The bill’s impact on state law is to expand consumer protections in the residential property insurance market, especially for homeowners recovering from catastrophic wildfires. It would require insurers to keep policies in force longer in disaster-related total loss situations and would give the Insurance Commissioner a longer wildfire-related nonrenewal moratorium to administer, using fire perimeter data from Cal Fire and the Office of Emergency Services. For insurers, the bill increases the duration of mandatory coverage obligations in affected areas, while leaving intact the statutory grounds for lawful cancellation or nonrenewal.
The general sentiment reflected in the bill text and voting history is supportive of stronger homeowner protections after wildfires. The findings emphasize housing stability, preventing displacement, and giving families time to rebuild, and the committee votes shown were favorable, including unanimous or near-unanimous “do pass” recommendations. The absence of recorded opposition in the provided materials suggests broad committee support, at least at the stages reflected here.
The main point of contention is likely the balance between consumer protection and insurer risk management. Supporters appear to favor longer mandatory coverage and longer nonrenewal protections because rebuilding after major wildfires often takes years. Potential concerns for insurers are that extending moratoriums could limit underwriting flexibility in high-risk wildfire areas and add pressure to already strained insurance markets, though the bill tries to address that by keeping the framework narrowly tied to disaster losses and by preserving exceptions for uninsurable risks and insured misconduct.
Impact
AB 2038 would amend Insurance Code Section 675.1 to require longer renewal obligations after a disaster-related total loss and to extend the wildfire-related cancellation/nonrenewal moratorium from one year to two years for properties in ZIP Codes within or adjacent to a fire perimeter. It would also leave in place existing exceptions for misconduct, unrelated losses, and uninsurable conditions, and it would make technical, nonsubstantive changes to crop insurance adjuster licensing under Section 14085. The practical effect is expanded homeowner protections and longer regulatory constraints on residential property insurers in wildfire-affected areas.
Sentiment
The bill appears to have generally favorable momentum. Its findings frame the measure as a response to prolonged wildfire recovery and displacement, and the recorded committee votes are strongly positive, including a 13-3 vote for do pass and re-referral and a later 10-1 do pass vote. No committee transcript opposition was provided, so the available record suggests support for the consumer-protection goals with limited visible dissent.
Contention
The likely contention is between wildfire recovery protections for homeowners and insurers’ ability to manage risk in high-loss areas. Supporters emphasize that rebuilding after catastrophic wildfires often takes multiple years and that homeowners need more time before facing cancellation or nonrenewal. Insurers and critics may worry that a longer moratorium and longer mandatory renewal period could further constrain underwriting in already stressed wildfire markets, although the bill preserves exceptions for insured misconduct, unrelated losses, and properties that become uninsurable for other reasons.