USA – CALIFORNIA Trends and Developments Contributed by: Cecilia Miller and Ryan Caplan, Buchalter LLP
California Legislative and Regulatory Update While the impact of court rulings will trail into late 2026 and years to come, the California General Assembly enacted numerous new laws designed to redress the underinsurance and financial instability of the state’s insurer of last resort – failures that were glaringly revealed in the aftermath of the wildfires. Of the laws that went into effect on 1 January 2026, several provide direct resources to some homeowners as well as improved transparency and education. Only a few of the nearly dozen new laws, however, increase protections for policyholders and seek to hold the insurance industry more accountable. The laws that appear to be most impactful in terms of the insur- ance industry, and the relationship between insured and insurer, include the following. • Eliminate “The List” Act (SB 495), which, inter alia, requires insurance companies to pay 60% of contents coverage limits, capped at USD350,000, to wildfire survivors who experience a total loss without submission of a detailed inventory. The emotional distress of creating an inventory of personal items that previously filled rooms that are now ashes and debris can be debilitating. Eliminat- ing the requirement of the inventory is a very good start, although the cap of 60% and the potential for insurers to argue around the edges remains a significant concern. • The Business Insurance Protection Act (SB 547), which, inter alia, prohibits non-renewals for com- mercial policies for one year. This Act, however, simply extends the Wildfire Safety Act of 2018, which provided a one-year moratorium for residen- tial property insurance. As such, the extension of the Act does not expand protections to the major- ity of policyholders impacted by the 2025 wildfires. A more meaningful legislative move would be expansion of the moratorium from the one year duration given the extended timeline for claims adjustment and rebuilding.
• The FAIR Plan Stability Act (AB 226), which allows the FAIR Plan, upon authority of the Insurance Commissioner, to access catastrophic bonds and provides additional financial support for the FAIR Plan. The financial resources used to prop up the FAIR Plan, however, are ultimately generated by higher premiums. Moreover, the Act does not necessarily achieve more timely payment of claims by the FAIR Plan since the Plan may still engage in extended claim adjustment and unreasonable claims handling. Conclusion The year 2025 was marked by monumental impacts to the California insurance industry and California poli- cyholders. The wildfires presented an inflection point for California lawmakers to “right the ship” in terms of ensuring that California policyholders are appropri- ately protected and the industry is financially viable in the face of disasters. Whether the enactment of the additional legislation went “far enough” and will bring the stability and fair- ness sought remains an open question. Further, the ability of the California courts to manage the onslaught of cases while issuing rulings that preserve the “ben- efit of the bargain” of the insurance contract for both insured and insurer will be tested. California’s long history of groundbreaking insurance jurisprudence, and remaining at the forefront of complex coverage questions, demonstrates that California is up to the challenge.
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