California wildfires: What is required versus what is requested, and why it matters

Request

The Notice asks insurers to forego any pending nonrenewals and cancellations. This request covers any notice of cancellation or nonrenewal issued before January 7, 2025, but which is not yet effective, subject to certain exceptions summarized below. The rationale for the request is to provide “stability” for affected communities, although no stated legal consequence attaches to an insurer declining the request. The Commissioner does stipulate, however, that any voluntary accommodation or compliance must be offered on a nondiscriminatory basis, without considering claims experience.

Requirements

Both the Bulletin and the Notice summarize legal requirements in California Insurance Code section 675.1.

1. One-Year Moratorium. There is a one-year moratorium on cancellations and nonrenewals within any ZIP Codes deemed by the Commissioner to be within or adjacent to the fire perimeter, but only if the cancellation or nonrenewal is “based solely on the fact that the insured structure is located in an area in which a wildfire has occurred.” Cancellations and nonrenewals for other valid reasons remain permissible even in these ZIP Codes. Note that Insurance Code sections 330-339 (Concealment) and 675.1(c) (gross negligence, unrelated losses, unrelated physical or risk changes) provide non-exhaustive examples of when a cancellation or nonrenewal would not be based “solely” on the location of a property.
   
   
2. Mandatory Renewals After Total Loss. Insurers must make offers of renewal for at least 24 months after a total loss caused by a declared disaster, with policy and premium adjustments for any changes to the exposure to loss.
   
   
3. Premium Payment Grace Period. Insurers must provide a 60-day grace period for premium payments during a declared state of emergency and for 60 days thereafter.

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If you have any questions about this Legal Briefing, please feel free to contact Dan Brown or the Eversheds Sutherland attorney with whom you regularly work.