6319-S

AN ACT Relating to insurance; amending RCW 48.30.320; adding a new chapter to Title 48 RCW; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that personal lines residential property insurers, as a condition of doing business in this state, have a responsibility to contribute to an orderly market for personal lines residential property insurance and that there is a compelling state interest in maintaining an orderly market for personal lines residential property insurance. The legislature further finds that massive cancellations and nonrenewals that are announced, proposed, or contemplated by insurers in the event of a natural disaster, including but not limited to a fire, flood, explosion, wind storm, or volcanic eruption, constitute a significant danger to the public health, safety, and welfare.

NEW SECTION. Sec. 2. In the state of Washington an insurer authorized under this title to write property insurance as defined under chapter 48.11 RCW, and writing homeowners' policies; mobile home owners' policies; or dwelling, fire, and allied lines policies shall not in any calendar year cancel or refuse to renew more than five percent of its total homeowners' policies in force as of December 31 of the prior year; five percent of its total mobile home owners' policies in force as of December 31 of the prior year; or five percent of its total dwelling, fire, and allied lines policies of all types and classes in force as of December 31 of the prior year, for the purpose of reducing the insurer's future exposure to claims resulting from natural disasters, including but not limited to fire, flood, explosion, wind storm, or volcanic eruption.

NEW SECTION. Sec. 3. In any county in the state of Washington an insurer authorized under this title to write property insurance as defined under chapter 48.11 RCW, and writing homeowners' policies; mobile home owners' policies; or dwelling, fire, and allied lines policies, shall not in any calendar year cancel or refuse to renew more than ten percent of its total homeowners' policies in force as of December 31 of the prior year; ten percent of its total mobile home owners' policies in force as of December 31 of the prior year; or ten percent of its total dwellings, fire, and allied lines policies of all types and classes in force as of December 31 of the prior year, for the purpose of reducing the insurer's future exposure to claims resulting from natural disasters, including but not limited to fire, flood, explosion, wind storm, or volcanic eruption.

NEW SECTION. Sec. 4. If prior to the effective date of sections 1 through 3 and 5 through 10 of this act, an insurer proposes to cancel or refuse to renew personal lines residential policies to an extent not authorized by section 2 or 3 of this act for the purpose of reducing future exposure to claims resulting from natural disasters, the insurer shall file a phase-out plan with the commissioner at least ninety days prior to the effective date of the plan. In the plan, the insurer shall demonstrate to the commissioner that the insurer is protecting market stability and the interests of its policyholders. The plan may not be implemented unless it is approved by the commissioner. In developing the plan, the insurer shall consider policyholder longevity, the use of voluntary incentives to accomplish the reduction, and geographic distribution.

NEW SECTION. Sec. 5. If the insurer considers the number of cancellations and nonrenewals under section 2 or 3 of this act as insufficient the insurer shall apply for approval of additional cancellations or nonrenewals on the basis of an unreasonable risk of insolvency. In evaluating a risk under this section, the commissioner shall consider and shall require the insurer to provide information relevant to: The insurer's size, market concentration, and general financial condition; the portion of the insurer's business in this state represented by personal lines residential property insurance; and the extent to which the insurer's assets have been voluntarily transferred by dividend or otherwise from the insurer to its stockholders, parent companies, or affiliated companies since January 1, 1994.

NEW SECTION. Sec. 6. A policy shall not be counted as having been canceled or nonrenewed for purposes of this section if:

(1) The policy was canceled or nonrenewed for an underwriting reason, nonpayment of premium, or any other lawful reason that is unrelated to the risk of loss from a natural disaster;

(2) The cancellation or nonrenewal was initiated by the insured; or

(3) The cancellation or nonrenewal was due to a failure of the insured to comply with a condition of coverage that was approved by the commissioner in order to reduce the risk of loss from a natural disaster.

NEW SECTION. Sec. 7. The commissioner shall approve or disapprove a waiver under section 4, 5, or 6 of this act within ninety days after the commissioner receives the application for waiver.

NEW SECTION. Sec. 8. In a contract or agreement to purchase dwelling fire or homeowner insurance, the following or substantially similar warning must be set forth in ten-point print on the face of the policy:

WARNING

THIS POLICY DOES NOT PROVIDE EARTHQUAKE OR FLOOD COVERAGE UNLESS AN ADDITIONAL PREMIUM HAS BEEN PAID AND THE POLICY IS ENDORSED TO PROVIDE SUCH COVERAGE.

NEW SECTION. Sec. 9. Sections 1 through 8 of this act shall constitute a new chapter in Title 48 RCW.

Sec. 10. RCW 48.30.320 and 1979 c 133 s 1 are each amended to read as follows:

Every authorized insurer, upon canceling, denying, or refusing to renew any individual life, individual disability, homeowner, dwelling fire, or private passenger automobile insurance policy, shall((~~, upon written request,~~)) directly notify in writing the applicant or insured, as the case may be, of the reasons for the action by the insurer. Any benefits, terms, rates, or conditions of such an insurance contract which are restricted, excluded, modified, increased, or reduced because of the presence of a sensory, mental, or physical handicap shall, upon written request, be set forth in writing and supplied to the insured. The written communications required by this section shall be phrased in simple language which is readily understandable to a person of average intelligence, education, and reading ability.

NEW SECTION. Sec. 11. Section 4 of this act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions and shall take effect immediately.