An act to amend Sections 2051 and 2051.5 of, and to add Article 15.6 (commencing with Section 1078) to Chapter 1 of Part 2 of Division 1 of, the Insurance Code, relating to insurance.
SB 878 revises California fire insurance claim handling rules by codifying and tightening deadlines for insurers after a fire loss. For claims arising on or after January 1, 2027, insurers would have to acknowledge a fire claim, provide forms and assistance, and begin investigation within 15 calendar days of notice; accept or deny the claim within 40 calendar days after proof of loss; and, once a claim is accepted in whole or in part, tender payment or otherwise perform the claim obligation within 30 calendar days. If an insurer misses the required deadlines, the bill imposes interest at 20% per year on the accepted amount, plus reasonable and necessary attorneys’ fees, in addition to any policy benefits and any prejudgment interest otherwise available.
The bill also creates a new reporting and transparency regime for fire insurers. By January 2028, and quarterly thereafter, insurers that offer or sell fire insurance in California would have to submit prompt-payment compliance data to the Department of Insurance, including claim counts, compliance rates, late-response days, late-payment amounts, and interest paid. A corporate officer must sign the report, and knowingly false information could trigger an administrative penalty. Starting July 1, 2028, the department would publish insurer-specific quarterly compliance reports on its website.
SB 878 further amends the Insurance Code’s fire indemnity rules for total losses and replacement-cost claims. It requires payment of actual cash value for a total loss within 30 calendar days of the date of loss, and then requires payment of undisputed replacement cost within 30 calendar days after specified triggering events, such as a valid contractor contract or a contract/escrow to buy a replacement home. The bill also extends and clarifies time limits for insureds to collect full replacement cost, especially in state-of-emergency losses, and limits insurers’ ability to deny building-code upgrade or replacement-cost coverage because the insured rebuilds or relocates to another home. It also bars deductions for land value at a new location when calculating certain residential replacement damages.
The bill’s overall sentiment appears favorable, especially toward stronger consumer protections and faster insurer performance after wildfire losses. The committee vote history shows support for moving the bill forward, including a 4-2 vote to do pass as amended and a later 14-0 committee vote to pass and re-refer, suggesting broad agreement on the need for more accountability in fire claims handling. The absence of recorded opposition in the provided materials suggests the measure was generally viewed positively, at least at the committee level.
The main points of contention likely center on the bill’s impact on insurers and the practicality of the new deadlines and penalties. Insurers may view the 20% interest penalty, attorneys’ fees exposure, public reporting requirements, and shortened claim timelines as burdensome or as increasing litigation and compliance costs. On the other hand, supporters are likely focused on wildfire survivors and policyholders who experience delays in claim adjustment and rebuilding, especially after large-scale disasters. The bill also preserves some insurer protections, including the ability to restrict payment in suspected fraud cases and the possibility of shorter timelines if the commissioner adopts stricter regulations.
SB 878 would amend Insurance Code Sections 2051 and 2051.5 and add new Article 15.6 to create enforceable prompt-payment standards for fire insurance claims, effective for claims arising on or after January 1, 2027. It would impose new statutory deadlines for claim acknowledgment, investigation, coverage determinations, and payment, add a 20% annual interest penalty and attorneys’ fees for noncompliance, and require quarterly insurer reporting and public disclosure by the Department of Insurance. It also changes fire-loss indemnity rules for total losses, replacement-cost claims, emergency-related claims, and relocation scenarios, affecting residential property policy forms issued or renewed on and after July 1, 2026.
The available legislative history suggests generally positive sentiment toward the bill, with committee votes indicating strong support and no recorded opposition in the provided materials. The measure appears to be framed as a consumer-protection response to delayed fire claim handling and rebuilding challenges, particularly in the context of wildfire losses. The unanimous 14-0 committee vote to pass and re-refer, along with an earlier 4-2 vote to advance the bill as amended, indicates that the core policy direction was broadly accepted even if details were still being refined.
The likely areas of contention are the bill’s stricter insurer obligations, especially the 15-day, 40-day, and 30-day deadlines, the 20% interest penalty, and the public reporting requirements that expose insurer-specific compliance data. Insurers may argue that these provisions are too rigid for complex fire claims, especially after catastrophic events when contractors, materials, and inspections are scarce. Supporters, by contrast, are likely to emphasize that fire survivors need faster payments and clearer accountability, and that the bill’s extensions for good cause and fraud protections help balance those concerns.