Insurance: home protection companies.

All line numbers (line 1, line 2, etc.) used in the Senate amendment format were removed, converting the document to a clean enrolled bill layout.

The header was changed from listing multiple amendment dates and 'Introduced by Assembly Member Papan' to showing 'Passed the Assembly August 26, 2026' and 'Passed the Senate August 26, 2026,' reflecting final passage.

The digest heading changed from 'AB 1931, as amended, Papan' to 'AB 1931, Papan,' removing the 'as amended' designation now that the bill is in its final enrolled form.

The definition of 'home protection contract limited lines agent' was changed from an 'entity' to an 'organization,' and the definition of 'utility' was similarly narrowed from 'an entity, organization or an affiliate of an entity, organization' to 'an organization or an affiliate of an organization.' This excludes individuals and non-organizational entities from eligibility.

The insurance company disclosure in Section 12771(a)(2) removed the word 'California approved' before 'insurance company,' changing the required statement from 'guaranteed by a California approved insurance company' to 'guaranteed by an insurance company.'

A utility's role with home protection contract fees was changed from 'collect' to 'transmit' throughout the bill. This limits the utility to passing along fees rather than actively collecting them, reducing the utility's involvement in the transaction.

Section 12772(a) broadened who must receive annual training. The old language required training for 'the individual identified in the register...who directs or controls' vendor operations (implying one person). The new language requires training for 'the individual identified in the register...or the individual who directs or controls' operations, potentially covering two different people.

The permitted activities for unlicensed employees of a home protection contract vendor were narrowed. The old language allowed 'clerical services, billing services, or indirect marketing support.' The new language allows only 'clerical or billing services,' removing indirect marketing support as a permissible activity.

Section 12767(a)(3) now allows the commissioner to designate different fee amounts by bulletin pursuant to Section 12978, in addition to the statutory $10,000 application fee and $5,000 renewal fee. This gives the commissioner flexibility to adjust fees without new legislation.

Section 12773(c) changed conduct imputation from discretionary to mandatory. The old language said the commissioner 'may, at the discretion of the commissioner' impute vendor conduct to the agent. The new language states vendor conduct 'shall be deemed the conduct of' the limited lines agent, property and casualty insurance agent, the home protection company, and any combination thereof. This removes commissioner discretion and expands liability to include the home protection company.

The bill no longer amends or repeals existing Insurance Code sections (12740, 12762, 12773). It now only adds Chapter 4 (Sections 12766-12774) to Part 7 of Division 2. All transitional sunset provisions and amendments to existing law were removed.

A grandfather clause that authorized a utility to continue collecting home protection fees on behalf of an agent if it was already doing so prior to January 1, 2025 (through December 31, 2027) was removed entirely.

The definition of 'utility' was narrowed from including private business organizations, municipal owned or operated entities, and cooperatives to only entities regulated by the Public Utilities Commission or their affiliates. This excludes municipal utilities and cooperatives from the bill's coverage.

Marketing or advertisements for home protection contracts are now prohibited from appearing directly on the utility bill. This is a new consumer protection not present in the prior version.

A new Section 12770 requires that customer payments applied through the utility bill be directed to utility service charges first, before any home protection contract fees are deducted.

A new annual renewal notice requirement mandates that agents provide written or electronic notice 15 to 45 days before each enrollment anniversary, disclosing the renewal date, fee amount, frequency of charges, cancellation method, and how to request a copy of the contract.

Unlicensed employees of vendors are now explicitly prohibited from enrolling customers or answering questions related to home protection contracts, with a narrow exception allowing them to transfer phone calls or direct customers to licensed parties. The agent must ensure the vendor informs its unlicensed employees of these restrictions.

Training requirements were restructured: instead of requiring all vendor employees involved in transactions to be trained, the bill now requires annual training for the specific individual who directs or controls the vendor's home protection contract-related operations. Training materials must be submitted for departmental approval and are deemed approved unless rejected within 30 days.

A new requirement that the home protection contract limited lines agent certify that the vendor has not been convicted of violating Section 1033 of Title 18 of the United States Code (the federal anti-kickback statute).

Marketing materials must now be provided or approved by both the home protection company AND the limited lines agent (or P&C agent), and must include the agent's name, email, phone number, and license number, plus a statement that purchasing the contract is optional and not required to buy other utility products.

A new requirement that contracts include a statement informing customers paying through their utility bill that they may elect an alternative payment method, with an explanation of how to change payment methods and what options are available.

The license renewal fee was increased from $500 to $5,000 per license period. The initial application fee remains $10,000.

New Section 12773 gives the commissioner authority to direct agents to implement corrective action plans with vendors or revoke vendor authorization, and to assess administrative penalties up to $5,000 per act ($10,000 if willful) against agents, P&C agents, or home protection companies.

Conduct imputation was changed from discretionary ('may be imputed at the discretion of the commissioner') to mandatory ('shall be deemed the conduct of' the agent, P&C agent, company, or any combination). This makes it easier to hold agents liable for vendor misconduct.

The definition of 'home protection contract limited lines agent' was changed from an 'entity' to an 'organization,' and enforcement cost assessment now applies only to the organization (not a person).

A new prohibition prevents utilities from enrolling customers in home protection contracts. Utilities must instead direct customers to a home protection company, limited lines agent, or P&C insurance agent for enrollment.

A home protection contract limited lines agent must now certify that the vendor it authorizes has not been convicted of violating Section 1033 of Title 18 of the United States Code (federal wire fraud statute).

Utility bills collecting home protection contract fees must now make it clear that the contract is issued by a third party and not the utility, in addition to listing fees separately from utility charges and including a customer inquiry phone number.

The definition of 'utility' in Chapter 4 (Section 12766) is narrowed to mean only an entity or affiliate regulated by the Public Utilities Commission, excluding municipal entities and cooperatives that were covered under the broader Section 12740 definition.

The scope of what vendors may do on behalf of agents is changed from 'transact home protection contracts' to 'solicit home protection contracts and collect home protection contract fees,' narrowing the permitted activities.

The application fee for a home protection contract limited lines agent license is set at $10,000 (previously unspecified in the text) and the renewal fee is increased from $500 to $5,000 per license period.

The compliance officer requirement is changed from designating 'one of its employees' to designating 'an individual licensee in the state to transact property and casualty insurance,' raising the qualification bar for the person responsible for regulatory compliance.

The digest adds language prohibiting unlicensed employees of a vendor from engaging in any activity relating to the transaction of home protection contracts other than clerical and other specified services.

Section 12769(c) was expanded from a general requirement that the 'not required' disclosure be provided to the purchaser, into a detailed list of specific delivery methods depending on how the contract is sold: directly to the purchaser, in marketing materials for mail orders, on posted signs at in-person locations, on the vendor's public-facing website for online transactions, and verbally on a recorded line for phone transactions. The obligation now also explicitly applies to vendor employees, not just the vendor itself.

A new subdivision (d) was added to Section 12769 stating that if a home protection contract vendor or its employee is not licensed as a property and casualty insurance agent or home protection contract limited lines agent, the vendor is not qualified or authorized to answer claim-related technical questions about the benefits of the contract.

The legislative counsel's digest removed language stating the bill would authorize the commissioner to extend the period between financial examinations of a home protection company to up to 3 additional years and to consider the availability of examiners as a condition warranting an extension. This suggests the corresponding provision was removed or modified in the bill text.

Section 12762 had two typos corrected: 'systems systems' changed to 'systems' and 'protection contract fee fee' changed to 'protection contract fee.' Section 12740 definitions were restructured by removing redundant lettered subsection labels (a, b, c, d) that duplicated the numbered items.

Creates an entirely new Chapter 4 (Sections 12766-12775) in the Insurance Code establishing a 'home protection contract limited lines agent' license for organizations authorized to transact home protection contracts through or in connection with a utility.

The original bill only amended Section 12752 to extend the examination period from 2 to 3 additional years. The amended bill retains that change but adds it as a minor section at the end of a much larger bill that now amends, repeals, and adds multiple sections across the Insurance Code.

Adds definitions for 'home protection contract limited lines agent,' 'utility services,' 'utility' (including private businesses, municipal entities, and cooperatives), and 'home protection contract vendor' (a registered utility and its employees).

Requires home protection contracts sold through agents or vendors to include a toll-free claim number, a disclosure that performance is guaranteed by a California-approved insurance company with contact information for the Department of Insurance, and a 30-day free return policy if no claims have been made.

Requires home protection contract vendors and their employees to act in good faith, not make false or misleading statements, and not sell contracts they know or should know are unnecessary for the consumer.

Requires home protection companies issuing contracts through utilities to file an insurance policy covering 100 percent of their contractual obligations in California, issued by an insurer with an AM Best Financial Strength Rating of B++ or better and at least $15 million in surplus and paid-in capital.

Requires home protection contract limited lines agents to maintain a register of authorized vendors, designate a compliance employee, ensure vendor employees receive annual training on contract types and ethical sales practices, and submit training materials to the Department of Insurance for review at least 30 days before use.

Allows vendors to collect home protection fees on behalf of agents only if the utility bill lists the fees separately from utility charges and includes a customer inquiry phone number. Prohibits override commissions based on number of contracts sold, but permits non-contingent marketing or administrative fees.

Authorizes the commissioner to direct corrective action plans, revoke vendor authorization, suspend or revoke agent licenses, and impose monetary fines. Conduct of vendor employees is imputed to the agent or company. The commissioner may issue cease and desist orders for violations of the insurance policy filing requirement.

Most new provisions become operative on July 1, 2027. A transition provision (Section 12773) allows utilities that were already collecting protection contract fees before January 1, 2025 to continue doing so until December 31, 2027.