For the first time since 1967, California increased minimum automobile financial responsibility liability coverage.  On September 28, 2022, Governor Newsom signed S.B. 1107, sponsored by Senator Bill.  S.B. 1107 amends section 16056 of California Vehicle Code to increase the minimum of motor vehicle financial responsibility limits on January 1, 2025, and again on January 1, 2035.  Insurance carriers and California drivers have two years to prepare for the first increase in financial responsibility rate increases, as the governor also signed S.B. 1155, which goes into effect on January 1, 2023.

Existing law requires an owner or operator of a motor vehicle or an owner of a vehicle used to transport passengers to maintain liability insurance coverage in the amount of $15,000 for the bodily injury or death of any one person, $30,000 for the bodily injury or death of all persons, and $5,000 for damage to the property of others resulting from one accident. (i).  The bill also requires coverages for uninsured motorist coverage (UM and underinsured motorist coverage (UIM) to be sold as one bundled coverage (known as UM/UIM).

S.B. 1107 will double the current minimum amount of liability coverage drivers are mandated to buy and nearly double them again in 2035 as follows:

January 1, 2025:

• $30,000 for physical injury or death for one person
• $60,000 for physical injury or death for two or more people.
• $15,000 in property damage coverage. (i).

January 1, 2035:

• $50,000 for bodily injury for an individual.
• $100,000 for bodily injury or death for two or more individuals.
• $25,000 for property damage. (i).

On February 1, 2023, the Insurance Commissioner will distribute a bulletin soliciting rate applications from insurers in the state to account for the changes to the financial responsibility law.  Insurers should be prepared to notify their insureds of the changes which are forthcoming and be prepared to submit the application for rate increases to the California Department of Insurance by July 1, 2023.  The rate change shall only go into effect on or after January 1, 2025, the operative date of the change in the law. (i).

This process will repeat itself on July 1, 2033: the Insurance commissioner will be required to distribute a bulletin to solicit rate applications to effectuate the January 1, 2035 increases to $50,000/$100,000.

Takeaway

California’s minimum auto financial responsibility limits are currently lower than that of 46 states and the District of Columbia (ii).  S.B. 1107 raises the floor on these limits for the first time in nearly 50 years.  California drivers will face two increases in the next ten years and have two years to prepare themselves for the first increase in minimum financial responsibility auto coverage.  Insurers should expect confusion from their insureds as these new laws pass, and should be prepared to answer questions about the laws and help insureds find policies which fit the new limits.

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Sources

2021 California Senate Bill No. 1107, California 2021-2022 Regular Session.
2021 California Senate Bill No. 1107, Senate Rules Committee, Senate Floor Analysis 2021-2022 Regular Session