(SACRAMENTO, CA) - Today, Assemblymember John Harabedian (D-Pasadena) and Governor Gavin Newsom announced legislation to ensure that homeowners benefit from interest earned on insurance payouts for destroyed or damaged properties.
"Homeowners, not insurance companies, should receive the interest earned on their insurance payouts. Many Angelenos devastated by these wildfires have lost nearly everything; they are struggling and need every bit of financial support. This bill puts people over profits, ensuring that rightful insurance payments go to those who need them most," said Assemblymember John Harabedian (D-Pasadena).
After a disaster, insurance payouts are held in escrow until rebuilding is complete, which can take months or even years. During this time, these funds can accrue significant interest.
While California law requires lenders to pay homeowners interest on escrowed funds for property taxes and insurance, it does not extend this requirement to insurance payouts held in escrow. This legislation would amend state law to explicitly require lenders to pay homeowners the interest earned on post-loss insurance payouts, just as they do for other escrowed property expenses.
In short, this bill ensures:
- Fairness: Homeowners receive the interest their insurance funds generate—not lenders.
- Disaster recovery: Provides much-needed financial support for wildfire victims rebuilding their homes and communities.
- No new burdens on lenders: Simply aligns insurance payout escrow rules with existing California escrow interest law.
- Protecting homeowners’ rights: Ensures insurance funds are treated the same as other escrowed property expenses.
“Homeowners rebuilding after a disaster need all the support they can get, including the interest earned on their insurance funds. This is a commonsense solution that ensures that they receive every resource available to help them recover and rebuild,” said Governor Newsom.
The bill will be heard in the Assembly policy committee during the spring.
###
