California regulation will give homeowners more accurate home replacement cost estimates
California homeowners will be able to get a more accurate estimate of their home replacement costs thanks to a unanimous ruling by the state’s Supreme Court Monday.
It found that Insurance Commissioner Dave Jones was within his right to enact a new rule requiring insurers to offer accurate home replacement costs. This would prevent incomplete assessments that leave homeowners underinsured and unable to rebuild homes destroyed by wildfires, Law360 reported.
The regulation outlines how insurers are to calculate and communicate to consumers the costs of rebuilding or replacing a home in its entirety such as cost of labor, demolition, overheard, profit, permits and architect’s plans, according to court documents.
The rule was introduced due to homeowner’s complaints after finding out their insurance policies didn’t cover the entire cost of rebuilding following damage from California’s firestorms.
Policyholder advocates say the ruling will help reduce litigation between policyholders and carriers. It would also reduce the number of underinsured homeowners because carriers would be forced to provide more accurate replacement cost estimates upfront.
Amy Bach, executive director of advocacy group United Policyholders that filed an amicus in support of Jones initiative, said the ruling was a “sigh of relief.”
“This decision was a huge vindication and sigh of relief,” Bach said, in a statement. “As you have the highest court in California acknowledging that the law hasn’t reflected the reality of the marketplace, which is that insurers are underestimating home replacement values and giving people a false sense of security about the adequacy of their coverage.” [Law360] — Subrina Hudson