Governor signs Commissioner Lara and Senator Padilla’s Disaster Recovery Reform Act into law, setting a new standard for survivor protections

News: 2026 Press Release

SACRAMENTO, Calif. — Governor Gavin Newsom has signed Senate Bill 876, the Disaster Recovery Reform Act, a far-reaching set of consumer protections for homeowners and renters recovering from wildfires and other major disasters. The law was sponsored by Insurance Commissioner Ricardo Lara and authored by Senate Insurance Committee Chair Steve Padilla (D-San Diego) and responds directly to wildfire survivors’ complaints filed with the Department of Insurance by speeding up claim payments while doubling penalties for delays and runarounds by insurance companies.

This new law will help survivors rebuild and recover more quickly by fundamentally changing how insurance companies must prepare for, respond to, and pay claims after a declared disaster. The Disaster Recovery Reform Act is the most comprehensive update to California’s claims-handling laws in more than 30 years. It also gives insurance regulators and lawmakers across the country a national model at a time when hurricanes, floods, and wildfires are generating record damage and consumer complaints nationwide.

“Today we are telling every wildfire survivor who shared their story: We heard you, and now it’s the law,” said Commissioner Lara. “No family who has lost everything should have to fight their insurance company to get the benefits they paid for. The Disaster Recovery Reform Act puts survivors in charge of their own recovery. It holds insurers accountable when they drag their feet, and it makes sure families can rebuild stronger and safer. I thank the Governor for signing this bill, Senator Padilla for his leadership, and the survivors whose courage made this possible. California is setting the standard for a full and fair recovery for consumers.”

“When disaster strikes, families shouldn’t have to face a second disaster in the claims process,” said Senator Padilla. “SB 876 modernizes laws that were written for a different era. Now insurers have to plan ahead, communicate clearly, and pay what they owe on time, and they face real consequences when they don’t. I’m grateful to Governor Newsom for signing this bill, to Commissioner Lara for his partnership, and above all to the survivors in Altadena, the Palisades, and across our state who refused to let their experiences be forgotten.”

What the Disaster Recovery Reform Act does:

• Requires a “disaster recovery plan” from insurers for handling claims and meeting timelines. The Department reviews each plan in advance, and it takes effect in an emergency.
• Doubles penalties during a declared emergency for violations of fair claims practices and settlement law.
• Requires insurance companies to pay restitution directly to policyholders when they engage in unfair claims settlement practices.
• Addresses delays caused by multiple adjusters by requiring insurers to send policyholders a status report within 15 days whenever a new adjuster is assigned.
• Provides adequate recovery funds through a mandatory offer of extended replacement cost coverage and additional living expenses coverage when a policy is written. Insurers must also provide regularly updated replacement cost estimates for new business and renewals.
• Supports safer rebuilding by applying building code upgrade coverage at the time of rebuild, not the time of loss, so it accounts for updated rules.

The law builds on reforms that Commissioner Lara has implemented since taking office in 2019 after the deadly Camp Fire devastated the Town of Paradise. Those reforms expanded advance payments for contents and living expenses, created a wildfire mitigation grant program, expanded insurance discounts, extended non-renewal moratorium protections to businesses, and strengthened the FAIR Plan.

The Department’s review of more than 2,000 complaints from Los Angeles wildfire survivors has already produced more than $338 million in additional payments to policyholders, including more than $50 million related to smoke damage. Governor Newsom signed the Smoke Damage Recovery Act (AB 1795) sponsored by Commissioner Lara and authored by Assemblyman Mike Gipson (D-Carson), protecting families from hidden smoke damage by establishing first-in-the-nation insurance requirements. SB 876 will help the Department hold insurance companies accountable so future disaster survivors get these protections from Day One.

Wildfire survivor advocates said the new law will change what recovery looks like for Californians.

“Underinsurance and claim delays have been the two biggest obstacles standing between disaster survivors and a full recovery for decades,” said Amy Bach, Executive Director of United Policyholders. “SB 876 attacks both. It requires insurers to offer the coverage people actually need, pay promptly, and keep policyholders informed, and it penalizes them when they don’t. This is a major step forward for California households, and we’ll be encouraging other states to use it as a blueprint.”

SB 876 takes effect January 1, 2027.

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