When disaster strikes, recovery often feels like an uphill battle for homeowners. For Californians impacted by the devastating Palisades and Eaton fires, a new piece of legislation proposed by Governor Gavin Newsom could help alleviate some financial burdens. The proposed bill, authored by Assemblymember John Harabedian (D-Pasadena), aims to ensure that homeowners—not lenders—benefit from the interest accrued on insurance payouts for homes destroyed or damaged during disasters.
Understanding the Proposed California Insurance Bill
Governor Newsom’s proposed bill addresses a gap in California law that currently allows lenders to collect interest earned on insurance payouts held in escrow during the rebuilding process. These funds, often substantial, remain in escrow accounts while homeowners repair or rebuild their properties—a process that can take months or even years.
Under existing law, lenders are required to pay interest on escrowed funds specifically tied to property taxes and insurance payments. However, insurance payouts for property losses are not covered by that rule. The proposed legislation would amend state law to require that homeowners receive the interest earned on these payouts.
“For those rebuilding their homes and lives, every dollar counts,” Gov. Newsom explained. “This measure ensures that people affected by disasters have access to all the resources they deserve.”
According to the governor’s office, interest on escrowed funds can accumulate at an annual rate of around 2%. For a $1 million insurance payout, this amounts to roughly $20,000 per year—a significant sum for homeowners attempting to regain stability.
Why This Matters to Homeowners
The Palisades and Eaton fires have left many Southern California residents grappling with the dual challenges of emotional toll and financial hardship. These fires, among the most destructive in recent memory, destroyed numerous homes and disrupted countless lives. For homeowners navigating insurance claims and rebuilding efforts, receiving the interest on their insurance funds could provide a critical financial cushion.
Assemblymember Harabedian, who is sponsoring the bill, emphasized the importance of fairness in allocating resources. “Homeowners, not lenders, should reap the benefits of interest earned on their insurance payouts. Many families have lost nearly everything, and they need every bit of financial support they can get to recover,” Harabedian stated.
For many, insurance payouts represent hope for rebuilding. However, that hope can be diminished by bureaucratic processes that delay access to funds or direct their benefits elsewhere. By aligning escrow rules for insurance payouts with existing laws for property taxes, the proposed bill strives to level the playing field.
The Bigger Picture: Supporting Disaster Recovery
The push to ensure homeowners benefit from escrow interest comes as part of a larger effort to support disaster recovery in California. Governor Newsom has recently enacted additional measures to streamline rebuilding processes, provide tax relief, and protect residents from predatory practices in disaster zones.
For example, Newsom has issued executive orders aimed at reducing bureaucratic red tape, expediting permitting for rebuilding projects, and safeguarding survivors from price gouging on essential goods and services. Efforts have also been made to secure temporary housing for displaced residents and prevent evictions for households hosting disaster survivors.
These complementary actions paint a broader picture of recovery—one that prioritizes the needs of individuals and communities over corporate interests. The proposed legislation on insurance payouts fits squarely within this framework, aiming to put more resources directly into the hands of families striving to rebuild their lives.
A Community Perspective on Change
While this legislation is a step in the right direction for disaster recovery, its potential impact is deeply personal. Families like those in Altadena and Pacific Palisades can attest to the long road ahead after a disaster. From finding temporary housing to securing contractors, the process of rebuilding extends far beyond financial transactions.
Access to the interest earned on their insurance payouts could mean a faster timeline for hiring workers, paying for materials, or even covering temporary living expenses. It’s about enabling families to take charge of their recovery, instead of waiting idly while their funds generate interest for financial institutions.
Critically, this policy could also reinforce the principle of fairness—an acknowledgment that the burdens of recovery should not fall disproportionately on those already suffering immense loss.
Looking Forward
Governor Newsom’s proposed bill offers more than just a technical fix to California’s insurance laws—it represents a step toward empowering disaster survivors to recover with dignity and fairness. Should the legislation pass, its impact could serve as a model for more equitable disaster recovery policies across the nation.
For California homeowners who have lived through the devastation of the Palisades and Eaton fires, this measure could be a lifeline. More broadly, it signals a commitment to prioritizing people over processes in the state’s ongoing efforts to recover, rebuild, and protect its communities in the face of future challenges.
As rebuilding continues and lawmakers deliberate, affected residents and advocates alike will be watching closely, hopeful that this policy change could bring not just financial relief, but a sense of justice to those who need it most.