California Governor Newsom signs disaster recovery reform act to curb insurer delays
Senate Bill 876 takes effect Jan 1, 2027, aiming to speed claim payments, require disaster recovery plans, and double penalties for insurer delays, while requiring restitution to policyholders for unfair settlement practices.
By Navneeta Nandan Sept 29 (The Insurer) — California Governor Gavin Newsom has signed the disaster recovery reform act for homeowners and renters recovering from wildfires and other major disasters, the California Department of Insurance said on Monday. Senate Bill 876, sponsored by Insurance Commissioner Ricardo Lara and authored by Senate Insurance Committee Chair Steve Padilla, will take effect from January 1, 2027. It is aimed at speeding up claim payments while doubling penalties for delays and runarounds by insurance companies.
It will overhaul parts of the insurance claims process by reducing administrative barriers, improving claim payments and curbing delays by insurers. As per the law, insurers need to have a "disaster recovery plan". It doubles penalties for violations during a declared emergency and requires insurance companies to pay restitution directly to policyholders when they engage in unfair claims settlement practices. This new law gives insurance regulators and lawmakers across the country a national model at a time when hurricanes, floods, and wildfires are generating record damage and consumer complaints nationwide, the statement added.
"SB 876 modernizes laws that were written for a different era. Now insurers have to plan ahead, communicate clearly, and pay what they owe on time, and they face real consequences when they don’t," Padilla said. The department's review of over 2,000 complaints from Los Angeles wildfire survivors has produced more than $338 million in additional payments to policyholders, including over $50 million related to smoke damage.