Second Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 12-0202.02 Bart Miller x2173 HOUSE BILL 12-1057 HOUSE SPONSORSHIP Levy, SENATE SPONSORSHIP Nicholson, House Committees Senate Committees Local Government State, Veterans, & Military Affairs A BILL FOR AN ACT Concerning additional protections for purchasers of homeowner's insurance policies in Colorado. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill requires the insurance commissioner (commissioner) to adopt rules on the following related to the sale of homeowner's insurance in Colorado: Criteria and requirements for estimates of replacement value of insured property; and An educational requirement for insurance producers related to homeowner's insurance, including estimating replacement value. The bill also puts into place the following with respect to homeowner's insurance policies in this state: Minimum requirements for additional living expense coverage for a period of time of no less than 24 months after a loss requiring additional living arrangements; Requirements that insurers make available to policyholders copies of homeowner's insurance policies, including declaration pages, within 48 hours after a loss or a request; Standards for paying contents loss claims in the event of total loss; Additional arbitration requirements for disputes between insured homeowners and insurers relating to policy coverage; A requirement to provide summary disclosure forms to homeowner's insurance policyholders at least annually; and Potential disciplinary action by the commissioner against insurance producers that fail to: Accurately describe to an insured the relationship of the producer to an insurer as the representative of the insurer and not a representative of, or advocate for, the insured policyholder; or Accurately represent the adequacy of policy limits in a homeowner's insurance policy to cover total loss of the property. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, 10-4-110.8, add (6) (7), (8), (9), (10) and (11) as follows: 10-4-110.8. Homeowner's insurance - prohibited and required practices - estimates of replacement value - additional living expense coverage - copies of policies - personal property contents coverage - inventory of personal property - definitions - rules. (6) The commissioner shall adopt rules governing the sale and renewal of homeowner's insurance policies that provide coverage on a replacement cost basis. Rules adopted under this section must, at a minimum: (a) Set forth criteria to be used for estimating the replacement cost, including the expenses that would reasonably be incurred to rebuild the insured structure in its entirety to existing code; (b) Prohibit an estimate of replacement cost from being based on the resale value of land or on the amount or outstanding balance of any loan; (c) Require reasonable steps to be taken at least annually to verify that the sources and methods used to generate estimates of replacement cost are kept current to reflect changes in the costs of reconstruction and rebuilding, including changes in building codes and the cost of labor, building materials, and supplies based upon the geographic location of the insured structure; (d) Require estimates of replacement value, and the methodology used to compute replacement value, to be communicated to a prospective insured or an insured in writing; (e) Require insurers to maintain written records of estimates of replacement cost for periods of time determined appropriate by the commissioner; (f) Require minimum standards for sources or tools used in estimating replacement cost, including standards to assure that any models used are properly validated to reflect replacement costs accurately; and (g) Set forth the circumstances in which an insurer will be required to accept a professional estimate of construction cost as evidence of replacement value. (7) (a) All homeowner's insurance policies must include coverage for additional living expenses. This coverage must be available for a period of twenty-four months and subject to other policy provisions. (b) An insurer may offer additional living expense coverage to the insured for a period beyond the twenty-four months required by paragraph (a) of this subsection (7). (8) All homeowner's insurance carriers must make available to an insured an electronic or paper copy of the insured's policy, including the declaration page, within forty-eight hours after a loss or a request from the insured for a copy of the policy. (9) In the event of a total loss, the insurer must offer the insured a settlement of no less than eighty percent of the listed value of the contents coverage under the homeowner's insurance policy in lieu of the insured providing a detailed inventory listing all of the contents of the insured property. (10) If an insured receives the depreciated value of insured contents insured under a policy, an insurer must make available to the insured the methodology used for determining the depreciated value of the insured contents. (11) Every homeowner's insurance policy must include an appraisal clause. This clause must allow for resolution of disputes related to issues of coverage under the policy and valuation of loss. SECTION 2. In Colorado Revised Statutes, 10-4-111, amend (3) as follows: 10-4-111. Summary disclosure forms required. (3) Every insurer or its designated agent shall furnish the required disclosure form to: (a) Applicants for insurance coverage at the time of the initial insurance purchase; (b) and thereafter on Policyholders of any renewal policy when there are changes in major coverages and exclusions or changes in factors considered in cancellation, nonrenewal, and increase in premium situations; and (c) Homeowner's insurance policyholders at least annually. SECTION 3. In Colorado Revised Statutes, 10-2-301, add (8) as follows: 10-2-301. Continuing education requirement - insurance valuation training - definitions. (8) (a) Definitions. As used in this subsection (8): (I) "Homeowner's insurance" has the same meaning as set forth in section 10-4-110.6. (II) "Insurance producer" or "producer" has the same meaning as set forth in section 10-2-103; except that "insurance producer" or "producer" only includes those producers required by the commissioner to meet continuing education requirements. (b) Insurance valuation training and continuing education. The commissioner shall by rule require that every insurance producer subject to continuing education requirements and offering homeowner's insurance coverage that has not already taken a homeowner's insurance valuation training course must satisfactorily complete one three-hour training course on homeowner's insurance valuation. All producers subject to continuing education requirements and offering homeowner's insurance coverage must take appropriate continuing education meeting the requirements prescribed by the commissioner. SECTION 4. In Colorado Revised Statutes, 10-2-801, amend (1) (o); and add (1) (q) and (1) (r) as follows: 10-2-801. Licenses - denial, suspension, revocation, termination - reporting of actions - definitions. (1) The commissioner may place an insurance producer on probation; suspend, revoke, or refuse to issue, continue, or renew an insurance producer license; order restitution to be paid from an insurance producer; or assess a civil penalty pursuant to section 10-2-804 or 10-3-1108, if, after notice to the insurance producer licensee and after a hearing held in accordance with sections 24-4-104 and 24-4-105, C.R.S., the commissioner finds that as to the licensee or applicant any one or more of the following conditions exist: (o) Failing to comply with an administrative or court order imposing a child support obligation; or (q) Failing to accurately describe to an insured under a homeowner's insurance policy the relationship of a producer as representing an insurer, and not as representing or advocating for the insured, at the time of application for a homeowner's insurance policy or during the claims process; or (r) Misrepresenting the adequacy of policy limits in a homeowner's insurance policy to cover total loss of the property. SECTION 5. Act subject to petition - effective date - applicability. (1) This act takes effect July 1, 2013; except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within the ninety-day period after final adjournment of the general assembly, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2012 and, in such case, will take effect on July 1, 2013, or on the date of the official declaration of the vote thereon by the governor, whichever is later. (2) The provisions of this act apply to activities related to homeowner's insurance occurring on or after the effective date of this act.