California insurance regulators and lawmakers have introduced new legislation aimed at accelerating insurance claim payments and strengthening consumer protections in the aftermath of major disasters.
Insurance Commissioner Ricardo Lara and Senate Insurance Committee Chair Steve Padilla announced Senate Bill 876, known as the Disaster Recovery Reform Act, as a response to ongoing recovery challenges following the January 2025 Los Angeles wildfires. The proposal seeks to modernize insurance claims handling requirements, reduce delays, and expand coverage protections for homeowners and renters affected by disasters.
Background and Rationale
According to the California Department of Insurance, wildfire survivors continue to report delays, denials, and miscommunication from insurers, making insurance-related issues the most common category of consumer complaints filed since the January 2025 fires. While the department reported that claim payments related to the Los Angeles wildfires are moving faster than after previous disasters, regulators stated that additional reforms are necessary to support full recovery.
Since January 2025, insurers have paid $22.4 billion in wildfire-related claims. Department data shows that 94 percent of 42,121 policyholder claims have been fully or partially paid. In addition, $183 million has been returned to policyholders through Department of Insurance investigations. Officials attributed the pace of payments in part to enforcement actions and laws enacted in recent years that require advance payments for contents and additional living expenses.
Key Provisions of Senate Bill 876
The Disaster Recovery Reform Act proposes several changes affecting insurers operating during declared emergencies:
- Requiring insurers to submit a disaster recovery plan outlining claims handling procedures and timelines, subject to Department of Insurance review before an emergency occurs.
- Doubling penalties for violations of fair claims settlement practices during a declared disaster.
- Requiring insurers to pay restitution directly to policyholders when violations occur.
- Addressing delays caused by multiple adjuster assignments by requiring insurers to provide status reports within five days whenever a new adjuster is assigned.
- Expanding Additional Living Expense policy limits by 100 percent during a declared disaster.
- Requiring faster payment of Actual Cash Value and structure replacement cost following a total loss, with interest due on late payments.
- Requiring insurers to offer extended and guaranteed replacement cost coverage when issuing or renewing policies, along with updated replacement cost estimates.
- Applying mandatory building code upgrade coverage at the time of rebuilding rather than at the time of loss.
Relationship to Prior Reforms
State officials noted that the proposed legislation builds on reforms enacted after the 2025 wildfires. Those measures established a wildfire safety grant mitigation program, expanded insurance discounts, accelerated claim payments, extended non-renewal moratorium protections to businesses, strengthened the financial stability of the FAIR Plan, and updated insurance laws related to transparency and accountability.
Commissioner Lara stated that the goal of the legislation is to establish a regulatory framework that facilitates faster and more consistent recoveries following disasters. He also indicated that the Department of Insurance views these reforms as a potential model for claims handling following other catastrophic events, including hurricanes and floods.
Stay informed and ahead of the curve — explore more industry insights and program opportunities at ProgramBusiness.com.