Overview
California Gov. Gavin Newsom has vetoed two homeowner insurance bills that would have expanded claim estimate disclosures and imposed interest on certain delayed payments after a total property loss.
Senate Bills 877 and 878 were written by state Sen. Sasha Renée Pérez, whose district includes communities affected by the Eaton Fire. Newsom returned both measures without his signature on Sept. 27 after they cleared the Legislature.
The bills grew out of complaints from homeowners dealing with insurance claims after the Eaton and Palisades fires in Los Angeles County. Pérez said survivors had reported problems obtaining detailed estimates and receiving insurance payments during recovery.
SB 877 focused on transparency in property insurance loss estimates. It would have expanded the definition of claim-related documents to include preliminary and final valuation, measurement and loss-adjustment calculations tied to covered damage and repair costs.
The proposal was intended to give policyholders more information when an insurer changed an estimate. Pérez’s office said some wildfire survivors reported large reductions in loss estimates without enough information explaining how those changes were made.
SB 878 addressed the timing of residential property insurance payments. For a total loss, the bill would have required insurers, subject to specified conditions, to pay actual cash value for the primary structure and other insured structures within 30 calendar days after the property was determined to be a total loss.
The measure also set payment deadlines for undisputed replacement-cost amounts once an insurer received sufficient proof of loss and supporting documentation. Interest would have accrued when payments weren’t made within the required 30-day period.
Newsom says existing insurance rules cover the issues
Newsom issued the same veto explanation for both measures. He said SB 877 and SB 878 would place parts of existing California Department of Insurance regulations and guidance into state law, including rules dealing with claim documents and payment deadlines.
The governor pointed to other regulatory work underway at the department, including California’s Sustainable Insurance Strategy and changes involving insurance administrative hearings.
His veto message said the two bills sought to codify portions of separate existing regulations and were unnecessary at this time.
Pérez said she hadn’t expected the vetoes. She told The Sacramento Bee that no major concerns about the legislation had emerged during discussions with the governor’s staff while the bills moved through the Legislature.
The measures had received substantial legislative support. SB 877 passed the Senate 35-0 in May, while SB 878 initially passed the Senate 29-6 before later amendments and further votes as it moved through the Assembly and back to the Senate.
Wildfire groups accuse Newsom of retaliation
The vetoes drew criticism from organizations representing consumers and wildfire survivors, some of which had recently opposed Newsom’s attempt to change California’s rules governing utility liability after utility equipment causes wildfires.
Consumer Watchdog Executive Director Carmen Balber alleged that the vetoes were retaliation against wildfire victims who had opposed the governor’s utility liability proposal. Joy Chen, executive director of Every Fire Survivor’s Network, made a similar accusation.
Neither group presented evidence establishing retaliation as Newsom’s reason for vetoing the bills. Asked about the allegation, Newsom spokesperson Anthony Martinez referred reporters to the governor’s veto message.
The dispute follows a difficult legislative fight over utility wildfire liability. Newsom had sought changes to the system governing financial responsibility after utility-caused fires, including a proposal affecting insurers’ ability to recover claim payments from utilities through subrogation.
Consumer Watchdog, Every Fire Survivor’s Network and several lawmakers opposed ending that process. Pérez was among the senators involved in negotiations and resisted the proposed change to subrogation.
Legislative leaders later produced a different package that retained subrogation while including provisions related to utility executives, wildfire mitigation and payments to survivors. That proposal did not advance after criticism from Newsom and utility representatives and a decision by the Assembly not to move the measure forward.
Pérez said she doesn’t know whether her position during those negotiations played any part in Newsom’s decision on SB 877 and SB 878.
Newsom signed other wildfire insurance measures
The two vetoes came less than two weeks after Newsom signed a separate package of wildfire recovery legislation in Altadena. Those measures dealt with smoke-damage claims, testing and remediation standards, mortgage protections and other issues affecting households recovering from the Eaton and Palisades fires.
The governor’s office said the package established standards for testing and remediating wildfire smoke contamination and required insurers to cover qualifying testing, cleanup and restoration.
Other legislation extended mortgage protections for disaster-affected homeowners. Newsom also signed SB 876 on Sept. 27, another measure dealing with fire and residential property insurance. On the same day, he vetoed SB 877 and SB 878.
The insurance industry hadn’t registered formal opposition to Pérez’s two bills, according to the account provided by The Sacramento Bee. Rex Frazier, president of the Personal Insurance Federation of California, told the newspaper that his organization had not discussed the measures with the governor’s office.
California Insurance Commissioner Ricardo Lara supported SB 878 alongside Consumer Watchdog and Every Fire Survivor’s Network.
Pérez said Lara’s support added to her surprise at the governor’s decision, given that the veto message cited work already being carried out by the Department of Insurance.
Newsom’s veto leaves the existing regulatory framework in place rather than adding the requirements in SB 877 and SB 878 to state statute. His administration maintains that current Department of Insurance rules already address the claim documentation and payment issues covered by the bills.
