California Bill Would Require Insurer Claims Handling Plans, and Double Penalties

A bill that promises legislative reform in California to speed up disaster recovery for homeowners and renters through improved insurance coverage and expanded consumer protections was introduced on the anniversary of the Los Angeles wildfires.

The Disaster Recovery Reform Act, Senate Bill 876, would also require a disaster recovery plan from insurers for handling claims effective in emergency situations and it would double penalties during declared emergencies for violations of insurance fair claims practices and settlement law.

SB 876 was introduced by California Insurance Commissioner Ricardo Lara Senate Insurance Committee Chair Steve Padilla.

The proposed legislation is a response to wildfire disaster survivors’ calls for swifter claims payments.

According to Lara, wildfire survivors have continued to report on-going problems accessing their insurance benefits, with delays, denials, and miscommunication from insurance companies at the top of the list of consumer complaints filed with the California Department of Insurance since the January 2025 L.A. wildfires.

Insurers have paid more than $22.4 billion on tens of thousands of claims from the L.A. wildfires, according to the latest data from the California Department of Insurance.

In another move aimed at relief for wildfire survivors, California Gov. Gavin Newsom said a group of major banks have agreed to extend mortgage relief for L.A. wildfire victims, as the area struggles to rebuild one year after the devastating blazes.

The CDI’s latest data shows 94% of 42,121 policyholder claims filed have been fully or partially paid, but Lara says more action is needed for successful recoveries and safer communities.

SB 876 would require a “disaster recovery plan” from insurers for handling claims and meeting timelines to be reviewed by the CDI in advance and put into effect in an emergency situation.

It would double penalties during a declared emergency for violations of insurance fair claims practices and settlement law, and require insurance companies pay restitution to policyholders when they violate the law.

The bill aims to address the reported delays in payments from the assigning of multiple adjusters to claims by requiring insurers to give status reports to policyholders within five days anytime a new adjuster is assigned.

Topics California Carriers Claims