June 10, 2026 · Insurance · 5,757 words · 12 speakers · 54 segments
Thank you. Welcome. Thanks for your patience. We will convene the Senate Committee on Insurance. There is a lack of a quorum, but with consent from the minority caucus will proceed as a sub. I do see that we have an author present among us, Assemblymember Calderon, with respect to file item number 2, AB1559. I will note as we begin that file items 1 and 3 are for proposed consent. Assemblymember Calderon, welcome. Thanks for your patience. Please proceed when ready.
Thank you.
This is my first presentation in the Senate this year, so I'm really glad it's in your committee, Senator. Okay.
Well, thank you, Mr. Chair. There's nobody else here, so I think I'm just speaking to you in the audience right now. AB 1559 provides new consumer protections to homeowners when insurers use aerial imaging to make decisions about coverage. Insurers have been increasingly using images from drones, aircrafts, and satellites in lieu of in-person inspections to make underwriting decisions. California homeowners have reported that they were blindsided by non-renewals based on these pictures. In many cases, it turned out that these images were inaccurate or outdated. AB 1559 requires insurers to provide notice before collecting aerial images of a residential insurance policyholder's home and allows policyholders to receive any aerial images taken of their home. If an aerial image is used to non-renew, cancel, or reduce coverage, AB 1559 also ensures that the image is up to date, providing the policyholder with the right to request an in-person inspection to verify the accuracy of the image or to verify remediation of the issue. Here with me today to testify is Mike Peterson, Senior Deputy Commissioner for Climate and Sustainability at the California Department of Insurance and Joe Loucher.
And hope the mic works. Good afternoon. Mike Peterson, I serve as Senior Deputy for the California Department of Insurance. Thanks for having me.
Good afternoon, Chair Padilla. by better protections when insurance companies collect or use aerial imagery. From our oversight of the California insurance markets and review of consumer complaints received by the department, we see that insurers are increasingly using aerial imaging non-renewals. Consumers should understand what information is being used to alter, cancel, or non-renew their coverage and to access those images. AB 1559 would deliver on those protections. The department gets property conditions, including roof condition, and that places homeowners at risk of losing coverage based on inaccurate information. AB 1559 allows consumers to request copies of any images used to make changes to their policies, effective aerial imaging tools to assess risk, while ensuring consumers have access to those images and an opportunity to address any issues before their coverage is canceled or non-renewed.
On behalf of Insurance Commissioner, I'm here representing United Policyholders, a nonprofit that helps consumers with an array of insurance issues, including underwriting and claims issues. And in some cases, those images are outdated, show someone else's property, or lead to erroneous conclusions about the subject property. You know, there are shadows thrown right and that we give people the time they need to take steps to correct the issue if it's realistic or protest if it doesn't apply to their protection. Another provision that's important is that the image be given to the policyholder so they can actually see what we're talking about here. citation of conditions with your roof or your property or a tree. So the images themselves really give the consumer the opportunity to directly rebut the issue to apply to all insurers, not just admitted insurers. California is working hard to retain and attract admitted carriers because our DOI has full authority over their rates and claim handling. So it would be important to make sure people are able to stay in the admitted market and not be abused through surplus lines carriers. So we would appreciate your vote in favor of this bill. Thank you. Thank you. Thank
you both for your testimony. This time I'll ask any individuals who'd like to register support for the bill to please approach the microphone, state your name and affiliation. Welcome.
Mr. Chair and members, Jolena Voris on behalf of the League of California Cities in support.
Nicole Wardleman on behalf of San Bernardino County in support.
Caitlin Leventhal on behalf of the California State Association of Counties in support.
David Azevedo on behalf of 3.2 million AARP members in California. We're in strong support.
Anna Buck on behalf of the California Association of Realtors in support.
Thank you. Anyone else like to register support for the bill on behalf of an organization or themselves? Seeing no one. We'll ask for any lead witnesses in opposition. Are there any lead witnesses in opposition to the bill? Please feel free to approach or individuals who would like to represent opposition to the bill. Seeing no one conferred, we'll bring it back to the committee. Welcome, Senator Becker. I don't know if anybody has any questions or comments.
All right, I would just add, thank the author. I think you've struck both an equitable and operational balance here. We are living in evolving times, as we all know. Appreciate your leadership on that matter.
And if you'd like to make any closing comments.
Yes. Thank you, Senator. So insurers need to be able to accurately and cost-effectively price or risk, but we certainly don't want the burden to fall on the homeowner. And so we just want to make sure that the aerial images are used in a responsible way in this process. And I respectfully ask for an aye vote at the appropriate time.
Thank you. Thank you for lack of a quorum. We will return to that. I see that we will hold that item. We also see we have another or other remaining presenting author with respect to file item number 4, AB 2038, Assemblymember Harbidi. Welcome. And in good company this afternoon, I see as well, reminding us all why we're here.
That's right. That's my 7-year-old Joshua. Welcome, Joshua. He likes to yell during the hearing. That's all right. He's going to keep us all awake. And I wish I was like Assemblymember Calderon that had no lead opposition witnesses. I'm very, very jealous. And thank you very much for all the work that you have done on this bill, Mr. Chair and staff. AB 2038 is really a simple bill, and it would extend the moratorium on total losses in a disaster for homeowners on residential insurance policies in any home that is within the perimeter of a fire zone. And it would extend both up to a year. The current moratoriums are two years for a total loss and one year if you are within the fire perimeter. And it's the number one thing that I hear from my constituents is most, I think everyone knows I represent Altadena, a home, unfortunately, of the Eden Fire, and lots of conversations about how to help survivors during this critical time. And at top of that list is extending the moratorium because folks are reasonably worried that they're not going to have insurance while they're trying to rebuild their lives. And just for some perspective, less than 1% of homes have been rebuilt in both the Palisades and the Eden Fire areas. And the surrounding areas of those fires, there's a lot of consternation. consternation. My joint author, Assemblymember Zabur, happens to represent one area that falls in that category, and a lot of his constituents are equally as worried. So this bill would extend SB 824 protections and I think it does it in a reasonable way I think that the delays in rebuilding are real I don even think an extra year will be totally sufficient but I think it will allow the sustainable insurance plan and other reforms to take hold and hopefully stabilize the market. It does have the support from our insurance commissioner and a number of different groups, including my witness in support, the California Consumer Federation, and I'll hand it over to Mr. Harrell now for his comments.
Welcome, State Shirtam again for the record. We'll give you five minutes.
Good afternoon, Mr. Chairman and member. Robert Harrell, I'm the Executive Director of the Consumer Federation of California. We're pleased to support the bill. I'll try to be brief. The author noted the two provisions within the bill. I think, big picture, this just reflects the reality that we're living in now. I wish it wasn't the reality that we're living in now, but it is taking longer. The author of this bill and I had a conversation shortly after the fires began and were finally put out, and I sort of predicted, sadly, that people were going to find out two things the hard way. One was they're significantly undersured, and that's been happening, and now they're battling their insurance companies to try to get paid, et cetera. And number two is it's going to take them much, much longer, and it's going to be much more expensive after an event of scale to rebuild. This reflects that. I happened to, in a prior part of my career, Mr. Chairman, be at the Department of Insurance in 2018 when SBA 24, authored by then-Senator, pre-Insurance Commissioner Lada, was moving through the process. And I can tell you that the proud folks at the Department of Insurance, including myself at that time, some of whom are still there, some of whom are not, worked on that bill very hard. And that was the best we could do with what the picture looked like at that time coming out of what you recall the 2017 fires. So here we are almost a decade later, and I think this is an absolutely appropriate reflection of the world we're living in. And we would strongly urge an eye vote.
Thank you for your testimony. Any other individuals on behalf of themselves or an organization want to register support for this bill, please approach the microphone. State your name and affiliation. Welcome.
Mr. Chair, a member. Jolena Voris, again, on behalf of the League of California Studies, in support.
Thank you.
I'm Joel Launcher on behalf of United Policyholders who supports this bill.
Thank you. Thank you. Any other individuals want to register support for this bill? Seeing no one come forward, we'll invite principal witnesses in opposition to the bill. Please feel free to approach. Welcome. Each of you will have two and a half minutes. State your name again for the record. Please proceed when ready.
Mark Segnon with the American Property Casualty Insurance Association in respectful opposition of AB 2038. AB 2038 further constrains an insurer's ability to rewrite, rebalance its portfolio and align exposure with available capital and reinsurance. At a time when the homeowner's market is already under sphere strain, this bill risks accelerating market pullbacks and reducing new writings in California. We believe the dynamic is already contributing to the growing reliance on the Fair Plan. When insurers cannot actively manage exposure, particularly during periods of elevated risk, they are forced to make difficult decisions. And a significant portion of the company's book is locked under a moratorium. That company may be compelled to reduce exposure even in lower risk areas to remain solvent. The mandates are especially problematic because Section 675.1 contains no explicit exception for insurer financial condition or capacity. In other words, there's no solvency safety valve. This issue was raised during the consideration of SB 824 and amendments to address it were requested but ultimately rejected. The same underlying concern remains resolved today. When the Commissioner last appeared before this committee, he acknowledged that decisions you make today will have real impacts on the insurance market as insurers continue whether or not to expand their right into California or reenter the market altogether, legislation that further restricts underwriting decisions becomes a serious deterrent. It is also important to understand the scale of these moratoriums. The moratorium triggered by a wildfire does not just apply to homes that are damaged or destroyed. It applies to entire zip codes adjacent to a fire, capturing far more homes than the total losses caused by the fire itself. California has more than 8 million homeowners policies. In 2024, the Department reported that 1 million homes were under non-renewal moratorium, a very substantial number. Just this year, a moratorium was declared covering 150,000 policies across Kern, Santa Barbara, San Luis Obispo, and Ventura counties following the Gifford Fire, even though the fire damaged five structures. Similarly, in December, another 14,800 policyholders received a one-year moratorium after the PAC fire, which destroyed 30 structures. These examples highlight the imbalance between actual loss and the scope of mandated continuation. When extended repeatedly without regard to ensure capability, these policies undermine the stability of the market rather than protect it. For these reasons, APCI must respectfully oppose AB 2038.
Thank you, Chair and members.
Paul Ramey with the Personal Insurance Federation of California, in respectful opposition. Members, we share the author's concern about the slow pace of recovery in the aftermath of the Eaton and Palisades fire. we understand the need to extend the non-renewal moratoriums for policyholders that are trying to rebuild their homes and their lives. Our objections are not with this portion of the bill. Our concern is with the other half of the bill that expands the same priority protections to homes that are near but untouched by a future declared disaster. Insurers have finite resources with which to cover their exposure. When legislation dictates that certain homes need to be locked in for multiple years, those restrictions limit insurers' ability to write new policies in other parts of the state. effectively prioritizing some communities over others. While that prioritization might be appropriate to give homeowners that are rebuilding peace of mind, we question the appropriateness of extending it to all zip codes adjacent to a declared disaster for an additional year. At a minimum, we recommend that the additional year for homes untouched by disaster be used as a carrot or an incentive to encourage homeowners to harden their homes and mitigate against future disasters. For these reasons, we respectfully oppose AB 2038.
Thank you for your testimony. Any individuals like to register opposition to the bill for themselves or an organization, please approach. State your name. Seeing no one come forward, we'll then bring it back to the committee members for questions or comments. Senator Jones.
Thank you, Chairman. I apologize for being a little bit late. For the folks in opposition, a couple of clarifying points I'd like to dig into a little bit. That last comment that you made, carrot or incentive, can you expand on that and what you mean by that? Because that's kind of confusing to me.
Sure. We've had some conversations with the author's office about tying the second year for homes that are untouched by disaster, tying that second year of protection to a mitigation standard. So if the homeowner were to mitigate or harden their home, they would get that second year of protection. that we think that there's value in creating that incentive. If there's a disaster that was recently nearby, plus there was some incentive to harden their home, perhaps that would create a real motivation to harden homes, which we know is a critical issue around the state. We need to really harden a lot more homes.
Okay. And then one of the other comments in opposition is in areas that the fire has already burned through, And keep in mind, this is an experience I've lived through twice now, 2003 and 2007 in my district. Parts, not very many anymore, but there's still even some lots that haven't been rebuilt even now, 20 years later, from those spots. The one comment that is interesting to me is that there's continued risk in an area or even an adjacent area similar to the risk before the fire. Let me back up. The houses that are left and the areas that are left in or near the fire, the risk is similar to what the risk was before the fire. And I'm having a hard time making that connection. You know once a fire goes through an area you know that to me seems like a fire area after that because a lot of the fuel has been removed So can you speak to that argument a little bit?
Senator Jones, I think that's the difference between those homes that are located within the fire perimeter, which currently has a two-year, and as Piff said, we're willing to move that to three-year. Because in those cases, you're right, the risk has been reduced. But for those homes that may be outside the fire perimeter, remember, in some cases, the zip codes can be very large, and there may only be a small part of the zip code that was affected by the fire, but the entire zip code gets the moratorium. And that zip code could have the exact same conditions that the areas that burned down had. The firefighters were just able to stop it before it got there. So the risk may be very, very similar.
Okay. And I understand that, too. And, you know, certainly I'm not going to, you know, sit up here and defend every policy that the state has put in place, you know, regarding the insurance market, you know, because it does need a lot of work. I'm not as concerned about this bill in particular as I have been other bills that have come to this committee regarding wildfire and such like that. And maybe to the author, do you want to respond to the comment about trying to work that out? Is that an accurate statement? Where are we at on that?
If the senator wouldn't mind and the author would suspend momentarily while we establish the quorum, please call the roll. That will give him time to think of his thoughts. Senators Padilla? Present. Padilla here. Nilo?
Becker? Present. Becker here.
Jones?
I'm here. Jones here.
Mendivar? Here. Mendivar here. Richardson? Rubio? Present. Rubio. Thank you. We have a quorum. Appreciate that. The author is recognized.
Thank you, Mr. Chair. And thank you, Senator, for the comments and the questions. Open door policy. We continue to talk about the issue. I think we're waiting on the next round of amendments. I would just say that, generally speaking, home hardening is incredibly important. And it's incredibly important to get it right throughout the whole state. I would be hesitant to tie any sort of short-term moratorium measure to home-hardening regulations, standards, or anything that wasn't very clear-cut set by this legislature, and certainly not standards that are set by industry that could change outside the scope of this committee or the entire body. And I think that those are critical issues that we still haven't been able to nail down. But, of course, the state isn't going to survive and the market isn't going to survive unless we have robust home hardening. I think that this bill shouldn't be conflated with that issue, but we will continue to talk about it. And they have made some good points that I think in their next round of amendments I'd be interested to see if we could get closer, but I'm open to it. Okay.
Mr. Chair, can I have one more? So let's dig down on the home hardening a little bit because we've passed some legislation in the recent years requiring home hardening. The industry has, I think, done a good job of requiring the home hardening for renewals and things like that. So in addition to what you guys already – when I see you guys – the industry generally, I know each company is a little bit different, but there's a general consensus on what the home hardening looks like and what home hardening has currently has been passed through the legislature. Can you speak to some specifics on what exactly you're looking for related to this bill?
Sure, thank you. the science on home hardening and the mitigation measures that make the biggest difference have really come a long way in the last handful of years. We have passed on those items that are top-tier priorities to the author's office. I think we'd appreciate the commitment to continue working with the author and staff on nailing those down. I think if the question is what are the mitigation measures, I'm confident we can get there on what those items are. The data is very clear. You know, it's a Class A roof. It's defensible space. It's zero to five. It's really not a mystery at this point. And so if it's a question of codifying those exact measures, I'm confident we can provide the land on those.
Okay. And look, there's plenty of current examples. I mean, KB built an entire community in my district in a very high fire-prone area, and because of the way they built these brand-new homes, you know, the insurance commissioner came down, did a tour. You know, we had a bunch of folks there, so it obviously can be done. I would really like to see this bill get to a spot where it's solving a problem, and I think the author is moving in the right direction, and I appreciate the comments from you guys today. I know it's carried a lot of no votes on it from Republicans up to this point in time, but I'm going to lay off on it today and hope that as this conversation continues that we can get to a good spot on this bill.
Thank you, Senator Jones. Senator Rubio? Yes. Thank you. Thank you. And I did have a discussion with the author, and I've already expressed my concerns, but I already just see so many bills that are coming our way, and as I shared with you, I have the fortunate or unfortunate, I guess, stance here that I get to – I've known insurance so personally for the last seven years, just being in the weeds of every bill, and we talked about how I have concerns with expanding outside the affected zip codes. And I'm sorry, I walked in a little bit when you had already introduced and talked about, can you just speak to that? Where are we with extending it to other zip codes that are not within the affected area? But I do want to say for the record that it's not about not wanting to support those zip codes. I do understand the unintended consequence of pushing risk and costs onto other policyholders at a time when we're trying to sustain the market. We're trying to ensure that people are not dropped in other places. We're trying to make sure that we have availability and affordability. So all that plays into my decision-making these days. And so can you share where you're at? No, I appreciate it.
Thank you, Senator, and have appreciated our conversations on this bill. As I explained and I'll explain to the committee, this bill merely extends the timeline within SBA 24. SBA 24, which was then Insurance Commissioner Lara when he was a senator, passed the bill, was a negotiation between the industry, the Department of Insurance. Some of the individuals here were in the midst of that. They defined a fire perimeter based on zip codes. I'm not changing that. I'm leaving the bill as is. I'm just extending the timelines. I don't know why that was the deal that was struck. I'm not exactly sure what the justifications were. My understanding was that was an industry and department of insurance compromise. We can debate what would be a better way of doing it, but I have not touched that. I'm leaving the existing way of defining a fire perimeter as is, and I think that we could probably come up with seven different ways of doing that. But I do think that that is what has been the law, the state of the law now for nearly seven or eight years. And I appear, from my standpoint, and I haven't seen any evidence otherwise, it has worked thus far. This is a bigger fire zone than maybe fires past. But I'm not sure exactly how an elegant solution would be crafted here today that would make it better.
Okay, thank you. Can I just turn it over to both? So let me hear first your thoughts on how this impacts the trickle-down effect. How can it impact the availability and affordability for other consumers? I mean, what are your thoughts on this? State your name.
Sure, thank you. Paul Ramey with the Personal Insurance Federation. So insurers have a finite amount of resources to cover their exposure. And when those resources are tied up through legislation regulation and explicit policies that means those resources are not available to write in other parts of the state And again we understand the public policy tradeoff That might be appropriate for folks who are rebuilding their homes and lives to have that peace of mind, understand that, willing to move off of that issue. I think where our concern lies is for, and my colleague has these statistics for some of these examples, where a fire can impact a couple of zip codes and even just a couple of homes, but the outcome is all of the adjacent zip codes can be hundreds of thousands, in some cases millions of homes that were not touched by fire and were unclear what the rationale, or if it's an appropriate public policy, to prioritize those communities over the rest of the state when they aren't the ones rebuilding. the extra time isn't a matter of labor or local government permitting or what the myriad of factors that are part of the rebuild question. And so that's, I think, the piece of the proposal that we are calling into question.
And I'm sorry. I walked in, and I always like to hear from both sides, and I made – excuse me. I did not ask. I thought that you were the proponents of the bill. And you don't have the – We've got them surrounded. No, they decided – Oh, I'm sorry. There you are. I'm like, where are the proponents? I think they're going to put me in a headlock after hearing.
Robert Harrell, Executive Director of the—
I don't know why I was thinking you were—so I'm sorry. I meant to hear both sides. I want to hear your thoughts.
Senator, good afternoon. Robert Harrell, Executive Director of the Consumer Federation of California in support of the bill. And as I noted in my original testimony, was at the department when SBA 24 by then-Senator Alara was drafted. It was a bill sponsored in 2018 by the Department of Insurance and the then-Insurance Commissioner. And the team there was part of a sort of 10-bill package to deal with, as you all probably recall, the significant fires in 2017. And as Senator Jones pointed out, there had been earlier waves of fires. And my answer to your question relates to that, which is that what we had seen at the time, if I recall, and I don't have the data in front of me, but what we had seen was there's different ways you can measure this, right? You can look at census tract, zip code. There's other measurements. But zip code was what we kind of landed on. What we had seen was that from previous fires, adjacent zip codes had been overly negatively impacted by cancellations and more likely non-renewals. And so the reason to hit not just a directly impacted zip code, but to also hit adjacent zip codes was to try to buffer that in many cases. Now, I would just note that in some cases there's a debate about, you know, you guys are dealing with smoke claims and other issues. Just because you live in a zip code adjacent to homes that burn down doesn't mean you might not have damage. And there's been historically some issues there that continue. But that's the short version, Senator, as to why the notion of not just the impacted zip code directly, but also the adjacent zip codes were included in the ultimate, and the author pointed out correctly, compromise solution between the industry, the department, and then Senator Lara.
Well, to that, I would say that, you know, I was here 2018 when the fire started, and at the time, it made sense. I remember that was the deadliest fire. It had cost the most lives at the time. So we were entering into this territory that was sort of unknown, and we had so many people impacted. So at the time it was almost, I don't want to say isolated, but it was the beginning of what has now become a consistent pattern of fires based on climate changes, wind patterns. It's just, we're not in 2018 when that was just the one, I don't want to say one-off, but it certainly was the biggest. And that's when we lost Paradise and other fires that came around. But since then, I mean, if you look at the number of fires that keeps happening, the reason I want to say that because at the time it made sense, right, zip codes. But you said that those are the ones that have been negatively impacted. But if you look at our fair plan, now it's the entire state of California that has been negatively impacted by all the collective fires. And so people are being dropped everywhere, not just one place. And I'm not saying it's good or bad. I'm just saying that now we're picking that zip code versus all these other people that would love to also get off the fair plan and get insurance. And so I just still think that we're disadvantaging other people that are also struggling with affordability and availability. And I just don't think picking an adjacent zip code makes sense in my head, just considering that I know people are coming to us constantly trying to find insurance, and they can. because the risk is, and I'm not trying to vilify the industry or anyone else, but the risk has become such that it's almost no one's fault. It is what it is, right? The climate conditions that we find ourselves in is creating this circumstance where the fires are just going to continue. So I feel really strongly that we're going to disadvantage other people that can't get off their fair plan. They're having a hard time because the risk is now concentrated in the zip codes that we're dictating versus just letting the insurers sort of assess the risk and try to insure equitably. But anyhow, this is, again, what I'm having to grapple with because I want it to be fair for everyone across California. But I'm sorry, I'll just I'll leave it at that. I am having a hard time including a zip code there. And I did express that to the author. And I'm sorry, but if that's included, I'm just going to have to lay off. Thank you. Thank you, Senator Rubio. Senator Richardson. I am going to vote for the bill today because I think there's a need to make sure people do have insurance, that it's affordable and accessible. However, I do believe it's very, in Palisades and Altadena, was that you have to also look at proximity. So in Paradise, you know, it was a broader area. You know, some of it was kind of a role in one city, more than one community. And I think that's a little bit different than the footprint of Paradise. So what I'm willing to do is actually support the bill today. However, it doesn't make it right today in 2026. We're redoing bills and amending. That's what we do all day. So just because someone did it in 2018 is not the answer to me of why we don't make an adjustment. I think it's very fair to say that people who can demonstrate to their insurer that they had damage in some way, I don't know if you want to create maybe a small buffer zone within that. Certainly, admittedly, people, maybe their house didn't have smoke damage, maybe it didn't have fire, but there are other ramifications impacting their ability to have insurance. So maybe you create a reasonable buffer zone. But to say any given zip code, knowing in Los Angeles that that would far exceed probably in most cases the areas that are impacted, I think is a leap too far. And then I also want to say for the record that I brought to the author's attention, being a person who's worked on construction, not all insurers actually provide insurance for a vacant lot or also for a property that is vacant. In fact, when I was looking to do that and doing improvements on homes, I could only find one insurance company in my whole area in Southern California, and I think the state, that actually provided that type of insurance. It's very unique because you don't have the protections that someone's physically going to be present on the property. You have people who are doing work where sparks can fly. Tools can be stolen. Someone can get hurt. There's any number of reasons why all insurance providers don't necessarily provide insurance for this situation. So to say you're going to require upon my knowledge of the author and the seriousness in which you approach your legislation, that you'll seriously look at that, and hopefully those that you're working with will. I appreciate the conversation.
I think the two senators might have come in as this conversation was going on. I'm waiting for the next round of amendments from our friends. We're very smart, very handsome, and I've been the first to say that if there is a better outcome or a better definition or better way of coming about it, we should do it. I still haven't seen it. And I think that one thing, much like the Palisades, the moratorium actually worked in