California's SB 876 doubles insurer penalties in declared emergencies and changes post-disaster claims rules
California Governor Newsom signed SB 876, the Disaster Recovery Reform Act, which requires insurer disaster recovery plans and doubles penalties for claims-handling violations during declared emergencies. The Department of Insurance says it takes effect January 1, 2027.
The California Department of Insurance announced on September 28, 2026 that Governor Gavin Newsom signed Senate Bill 876, the Disaster Recovery Reform Act, authored by Senator Steve Padilla.
According to the department, insurers must prepare a disaster recovery plan for handling claims and meeting timelines; the Department of Insurance reviews each plan in advance, and it takes effect when an emergency occurs. During a declared emergency, penalties double for breaches of claims-handling and settlement rules. Insurers must pay restitution directly to policyholders when they engage in unfair claims settlement practices, and must send a status update within 15 days after assigning a new adjuster.
When writing a policy, insurers must offer extended replacement cost and additional living expense coverage, and must provide updated replacement cost estimates for new and renewed policies. Building code upgrade coverage will be applied based on the time of rebuild instead of the date of loss.
The department's announcement gives January 1, 2027 as the effective date for the bill. A separate department summary of the 2026 insurance package describes the effective dates as phased, starting January 1, 2027, with more provisions on January 1, 2028, so agents should check the chaptered bill text for the date of each provision.
For agents in California, the changes bear on conversations with buyers and sellers about replacement cost coverage and rebuilding after a disaster. This summary comes from the department's description and is not a reading of the bill text.