State moves fast to boost homeowners' insurance protection.

Responding to insurance-related concerns raised by the Northridge earthquake and the Southland fires, state officials last week introduced new legislation and issued a new regulation aimed at boosting policyholders' rights and protection. California Insurance Commissioner John Garamendi issued an emergency regulation which bars insurance companies from canceling or refusing to renew policies in the affected area for 60 days following an earthquake.

"Los Angeles area residents already reeling from the earthquake shouldn't face loss of their insurance if they are temporarily unable to make a premium payment," Garamendi said. "This extension gives consumers a reasonable amount of time to ensure themselves of continued coverage."

State Sen. Art Torres, D-Los Angeles, said last week he will introduce legislation to prohibit insurers from canceling or not renewing policies in a disaster-affected area for six months after a disaster.

Torres had told the Business Journal last November that he was planning to introduce the legislation because of reports to his office that homeowner policies were not renewed in the areas affected by the 1991 Oakland fire.

Specifically, realtors in the Oakland area complained to Torres, who heads the Senate Insurance Committee, that they were not able to close escrow on homes because homebuyers could not secure insurance policies.

Torres said he wants to extend the Garamendi-imposed moratorium from 60 days to six months to insure that homeowners and small business owners have time to get insurance if they must rebuild after an earthquake or fire.

Torres said he introduced a bill last week, which he calls the "homeowners' bill of rights," which is aimed at increasing homeowner property loss protection and requires insurers to explain policies "in plain English."

"The most important thing about the homeowners' bill of rights is reliability," Torres said. "Homeowners will be able to rely on what they have signed as what they are going to get."

Torres said he wrote the legislation after conducting extensive hearings last fall on insurance complaints from homeowners affected by the Oakland fire of 1991 and the Southland fires of 1993. Many people complained at those meetings that they thought their policies covered full replacement costs, but they did not.

Fire victims also complained that they could not understand their homeowners' policies, Torres said. "The bill would make the language (in homeowners policies) as understandable as possible," he said.

The homeowners' bill of rights would, among other things:

* Require insurers to sell insurance which covers the full amount needed to replace the home and other structures on the property. Lesser coverage may be offered in the policy.

* Require that liability coverage, additional living expense coverage and landscape coverage be made available in homeowners policies.

* Require the state Department of Insurance to develop a single, uniform format for declarations pages of homeowners' policies. This statement must be on one page, show the key coverage, be individualized for each policyholder and show any limits on the policy.

* Prohibit insurance companies from using the term "guaranteed replacement cost coverage" when the coverage does not provide unlimited, full replacement coverage, including building code upgrades.

* Prohibit insurance companies from requiring policyholders to submit unreasonable or unnecessarily burdensome documents or other information to support a claim.

Also last week, state Assemblyman Rusty Areias, D-Los Banos, introduced legislation which would resurrect the state earthquake insurance fund, which was dismantled by the Legislature after one year of operation.

The original bill creating the fund, which would paid out up to $15,000 per claim in the event of an earthquake, was passed by the Legislature in 1990 and went into effect on Jan. 1, 1992.

The original bill was criticized by Garamendi, Gov. Pete Wilson and other elected officials as insufficient to cover damages in the event of a major earthquake in a major metropolitan area.

The program was dismantled on Jan. 1, 1993, and the $120 million in funds was given back to homeowners who had paid into it.

The main differences between the original earthquake fund bill, which Areias also co-authored, and the one introduced last week involve price and administration of the program.

The old earthquake fund was administered by the Department of Insurance. The new bill would authorize the Department of Housing and Community Affairs to run the program.

The dismantled earthquake fund charged homeowners annual fees that ranged from $12 to $60. The new bill would charge annual fees of $25 to $75, in order to make the fund more financially sound.