AMENDED IN SENATE AUGUST 20, 2026
AMENDED IN SENATE AUGUST 13, 2026
AMENDED IN SENATE JUNE 18, 2026
AMENDED IN ASSEMBLY APRIL 16, 2026
AMENDED IN ASSEMBLY APRIL 15, 2026
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
94
Introduced by Assembly Member Papan
February 13, 2026
An act to add Chapter 4 (commencing with Section 12766) to Part 7 of Division 2 of the Insurance Code, relating to insurance.
Vote: majority Appropriation: no Fiscal committee: yes Local program: no
LEGISLATIVE COUNSEL’S DIGEST
Existing law regulates home protection companies, which issue contracts for the repair or replacement of a component, system, or appliance of a home. Existing law prohibits a person from issuing home protection contracts in this state unless they hold a home protection company license issued by the Department of Insurance, except as specified. Existing law requires a home protection contract, as defined, to specify certain information in clear and conspicuous terms, including, but not limited to, every appliance, system, or component covered by the contract and all exclusions and limitations respecting the extent of the contract.
This bill would, beginning on July 1, 2027, establish a license for a home protection contract limited lines agent, as defined, for an organization authorized to transact home protection contracts on behalf of a home
protection company and in connection with a home protection contract vendor, as defined. The bill would additionally authorize a utility to solicit home protection contracts and transmit protection contract fees if it is a vendor acting on behalf of specified entities, including a licensed home protection contract limited lines agent. The bill would require an applicant for a license to submit specified items to the commissioner, including an application and a certificate stating the named applicant is trustworthy. The bill would authorize an agent to authorize a home protection contract vendor, as defined, to solicit contracts and collect home protection contract fees on its behalf subject to specified conditions, and would authorize a purchaser to return the contract within 30 days of purchase if no claim has been made.
The bill would allow a vendor to collect fees on behalf of an agent through the utility bill if the bill makes it clear that the home protection contract is issued by a third party and not the utility, lists the protection contract fees separately from the utility charges, and the bill includes a telephone number for customers to inquire about their contract. The bill would also require the contract to include specified disclosures. The bill would prohibit an unlicensed employee of a vendor from participating in the transaction of home protection contracts other than clerical or billing services, and would require the home protection contract limited lines agent or property and casualty insurance agent to ensure the home protection contract vendor informs its employees about the restrictions. The bill would authorize the commissioner to implement specified penalties if a vendor violates these provisions. The bill would also require a home protection company to maintain a single insurance policy covering 100% of the company’s contractual obligation associated with the home protection contracts, among other specified requirements.
The bill would prohibit a property and casualty insurance agent from acting as an agent of a home protection company in connection with a utility unless the company has filed a notice of appointment with the commissioner. The bill would require the notice of appointment to continue until specified documents are filed.
The people of the State of California do enact as follows:
SECTION 1.
Chapter 4 (commencing with Section 12766) is added to Part 7 of Division 2 of the Insurance Code, to read:
Chapter 4. Home Protection Contract Limited Lines Agent
(a) A utility may solicit home protection contracts and transmit protection contract fees if it is a home protection contract vendor acting on behalf of, or in connection with, either of the following:
(1) A home protection contract limited lines agent.
(2) A property and casualty insurance agent that has been appointed by a home protection company pursuant to Section 12772.
(b) (1) A home protection contract vendor, or its unlicensed employees, shall not enroll customers in a home protection contract or answer questions related to the contract, except as permitted by subdivision (d) of Section 12769. The home protection contract vendor shall direct customers to a home protection company, home protection contract limited lines agent, or property and casualty insurance agent for enrollment or home protection contract specific questions.
(2) The home protection contract limited lines agent or property and casualty insurance agent shall ensure that the home protection contract vendor informs its unlicensed employees involved in home protection contract-related operations of the restrictions in this subdivision.
(c) For purposes of this chapter, the following definitions apply:
(1) “Home protection contract limited lines agent” means an organization licensed pursuant to this chapter, authorized to transact home protection contracts on behalf of a home protection company and in connection with a home protection contract vendor.
(2) “Home protection contract vendor” means a utility complying with the requirements of this chapter and either of the following:
(A) Registered pursuant to Section 12768.
(B) Acting on behalf of or in connection with a property and casualty insurance agent.
(3) “Utility” means an organization or an affiliate of an organization regulated by the Public Utilities Commission.
(a) An applicant for a home protection contract limited lines agent license under this section shall submit all of the following to the commissioner:
(1) An electronic or written application for licensure, signed by an officer of the applicant, in a form prescribed by the commissioner.
(2) A certificate issued by the home protection company that is to be named in the home protection contract limited lines agent license, stating that the home protection company has satisfied itself that the named applicant is trustworthy and competent to act as its home protection contract limited lines agent and that the home protection company will appoint the applicant to act as its agent if the home protection contract limited lines agent license is issued by the commissioner. The certification shall be signed by an officer of the home protection company on a form prescribed by the commissioner.
(3) An application fee of ten thousand dollars ($10,000) and, for each license period thereafter, a renewal fee of five thousand dollars ($5,000). ($5,000) or any fee amount designated by the commissioner by a bulletin pursuant to Section 12978.
(b) Costs associated with an enforcement action shall be assessed against the organization licensed pursuant to this chapter.
A home protection contract limited lines agent may authorize a home protection contract vendor to solicit home protection contracts and collect protection contract fees on its behalf and under its authority, under the following conditions:
(a) The home protection contract limited lines agent certifies that the home protection contract vendor has not been convicted of violating Section 1033 of Title 18 of the United States Code.
(b) Home protection contract marketing materials distributed by the home protection contract vendor to solicit home protection contracts includes the disclosures listed in subdivision (b) of Section 12769.
(c) (1)The home protection contract limited lines agent maintains a register in a form prescribed by, or acceptable to, the commissioner listing the home protection contract vendors permitted to solicit home protection contracts and collect protection contract fees on its behalf. The register shall include
both of the following:
(1) The name and contact information for both of the following:
(A) The home protection contract vendor.
(B) An officer or person who directs or controls the home protection contract vendor’s home protection contract-related operations.
(2) The identification number provided by the Public Utilities Commission to the utility, or the affiliate, when the affiliate holds the identification number.
(d) The home protection contract limited lines agent submits the register to the commissioner annually or upon request.
(e) The home protection contract limited lines agent designates an individual licensed in the state to transact property and casualty insurance to be responsible for its compliance with home protection contract laws, rules, and regulations of the state.
(f) The individual designated under subdivision (e) and any of the organization’s partners, members, controlling persons, officers, directors, and managers complies with the background check requirements as required by the commissioner.
(g) The home protection contract limited lines agent has paid the applicable licensing fees required by Section 12767.
(a) The marketing materials distributed by the home protection contract vendor to solicit home protection contracts shall be provided or approved by the home protection company and the home protection contract limited lines agent or the property and casualty agent.
(b) The marketing materials described in subdivision (a) shall comply with Section 1725.5 and shall include a clear and conspicuous disclosure of all of the following:
(1) The home protection contract limited lines agent’s or property and casualty insurance agent’s name, email address or other comparable electronic communication method, telephone number, and license number.
(2) The purchase of a home protection contract is optional and not required to purchase any other product or service offered by the utility.
(c) Marketing or advertisements for home protection contracts shall not appear directly on the utility bill.
(d) An unlicensed employee of the home protection contract vendor shall not participate in the transaction of home protection contracts except to provide clerical or billing services. Nothing in this section shall prohibit a home protection contract vendor’s unlicensed employee from transferring a phone call from a customer or directing a customer to contact a home protection contract limited lines agent, property and casualty insurance agent, or home protection company to answer home protection contract-related questions.
(a) A home protection contract vendor may collect protection contract fees through the utility bill on behalf of a home protection contract limited lines agent or a property and casualty insurance agent if the utility bill does all of the following:
(1) Includes a clear statement that the home protection contract is issued by a third party and not the utility.
(2) Lists the protection contract fees separately from any utility charges or fees, with clear identification that the fees are charged by the home protection contract limited lines agent or property and casualty insurance agent.
(3) Includes a telephone number, and if space allows, a digital contact for customers to contact the home protection contract limited lines agent or property and casualty insurance agent to inquire about their home protection contract.
(b) A home protection contract vendor that collects fees through a utility bill shall ensure that customer payments are applied first to charges due for utility services prior to applying payments for home protection contracts.
(c) A home protection contract vendor shall not be required to maintain protection contract fees in a segregated account if the home protection company has provided in writing that the funds need not be segregated from funds received by a home protection contract vendor for utility services. All protection contract fees received by a home protection contract vendor from a customer shall be considered funds held in trust by the home protection contract vendor in a fiduciary capacity for the benefit of the home protection company.
(d) (1) Compensation received by the home protection contract vendor shall comply with Section 12760.
(2) Notwithstanding Section 12760, a home protection company shall not pay an override commission or marketing fee to an employee of the home protection contract vendor for the solicitation of, or for the sale of, home protection contracts resulting from the solicitation of home protection contracts by the home protection contract vendor.
(3) Nothing in this section shall be construed to prohibit a home protection contract vendor from receiving compensation for billing and collection services, provided the compensation is not contingent on the amount of protection contract fees collected or attributable to the home protection contract vendor’s solicitation of home protection contracts.
(e) If protection contract fees are collected by the home protection contract vendor on behalf of a home protection contract limited lines agent or property and casualty insurance agent through the utility bill on a recurring basis, the home protection contract limited lines agent or property and casualty insurance agent shall provide each customer written or electronic notice not fewer than 15 calendar days and not more than 45 calendar days prior to every anniversary of the customer’s enrollment date. The notice shall clearly and conspicuously disclose, as applicable, all the following:
(1) The anniversary date of the customer’s enrollment.
(2) The date or dates on which the renewal period begins, and if the customer’s home protection contract renews, the length of the renewal period.
(3) The protection contract fee that will be charged to the customer on a recurring basis and the frequency of charges.
(4) How the customer may cancel the home protection contract.
(5) How the customer may request a copy of the home protection contract.
(6) Contact information for the home protection contract limited lines agent or property and casualty insurance agent.
(a) In addition to the items listed in paragraph (a) of Section 12762, a home protection contract transacted pursuant to this chapter shall include all of the following:
(1) (A) A prominent and readily noticeable statement explaining how to make a claim, including a toll-free telephone number, for claim service and cancellation requests.
(B) Beginning on January 1, 2028, this statement shall also include a digital contact.
(2) A disclosure, with the telephone number in boldface type in substantially the following form:
“Performance to you under this contract is guaranteed by an insurance company. You may file a claim with this insurance company if any obligation in the home protection contract has not been honored within 60 days after your request. The name and address of the insurance company is:
(insert name, address, and contact information).
If you are not satisfied with the insurance company’s response, you may contact the California Department of Insurance at 1-800-927-4357 or file a complaint online at the department’s internet website (www.insurance.ca.gov).”
(3) (A) A provision permitting the customer to return a home protection contract to the home protection company, the home protection contract limited lines agent, or the property and casualty insurance agent within 30 days of purchase, if no claims have been made.
(B) For purposes of this section, “return” means a request by the customer, within the period specified in subparagraph (A), to void the home protection contract.
(C) The purchaser may return the home protection contract by contacting the home protection company, the home protection contract limited lines agent, or the property and casualty insurance agent and requesting that the home protection contract be voided. Upon return, the home protection contract shall be void from the beginning, and the parties shall be in the same position as if no home protection contract had been issued. The full purchase price of the home protection contract shall be refunded to the customer.
(4) A statement that a customer paying for the home protection contract through their utility bill may elect to pay for their home protection contract using another method of payment and an explanation of how the customer may change the payment method associated with their home protection contract, including a description of the payment methods available to the customer.
(a) The individual identified in the register maintained pursuant to subdivision (c) of Section 12768, or the individual who directs or controls the home protection contract vendor’s home protection contract-related operations, shall receive annual training provided by the home protection contract limited lines agent or the property and casualty agent. The training material shall contain instruction on all of the following:
(1) Home protection contract law, including the marketing disclosure requirements, and the rules related to protection contract fee collection.
(2) The types of home protection contracts being offered.
(3) The restrictions on the home protection contract vendor and its unlicensed employees set forth in subdivision (b) of Section 12766 and subdivision (d) of Section 12769, including the prohibition against enrolling customers in a home protection contract or answering questions related to a home protection contract.
(b) The training materials, and any material changes to the training, shall be submitted for approval to the department prior to use. The training materials, including any changes, shall be deemed approved for use unless the home protection contract limited lines agent or property and casualty insurance agent is notified by the department to the contrary within 30 days of submission.
(c) Failure to submit training materials or changes for departmental review, or use of unapproved or disapproved training materials, shall constitute grounds for denial of an application for a license, nonrenewal or suspension of a license, or other action as deemed appropriate by the commissioner.
(a) If the commissioner determines that a home protection contract vendor, or its unlicensed employee, has violated any provision of this part or any provision of this code applicable to home protection contracts and companies, the commissioner may do either or both of the following:
(1) Direct the home protection contract limited lines agent or property and casualty insurance agent to do either or both of the following:
(A) Implement a corrective action plan with the home protection contract vendor.
(B) Revoke the authorization of the home protection contract vendor to solicit home protection contracts or collect protection contract fees on its behalf and under its license and direct the home protection contract limited lines agent to remove the home protection contract vendor’s name from its register.
(2) In accordance with subdivision (c), and except as provided in Sections 1669, 1742, and 1748.5, after notice and hearing, either or both of the following:
(A) Suspend or revoke the license of the home protection contract limited lines agent.
(B) Assess an administrative penalty against the home protection contract limited lines agent, the property and casualty agent, the home protection company, or any combination thereof, not to exceed five thousand dollars ($5,000) for each act, or, if the act was willful, not to exceed ten thousand dollars ($10,000) for each act.
(b) A home protection contract limited lines agent or property and casualty insurance agent who allows a home protection contract vendor to continue to do business after being directed to revoke the home protection contract vendor’s authorization or takes positive actions to assist the home protection contract vendor in doing so, in addition to any other action authorized under this section, may be subject to a monetary penalty pursuant to paragraph (3) of subdivision (a) of Section 12921.8.
(c) The conduct of the home protection contract vendor, while acting within the scope of its authority, shall be deemed the conduct of the home protection contract limited lines agent, property and casualty insurance agent, the home protection company, and any combination thereof, for purposes of this part.
(a) In addition to the provisions listed in Section 12743, the following provisions of Chapter 5 (commencing with Section 1621) of Part 2 of Division 1 shall apply to a home protection contract limited lines agent:
(1) Article 1 (commencing with Section 1621) to Article 4 (commencing with Section 1652), inclusive.
(2) Article 6 (commencing with Section 1666).
(3) Article 8 (commencing with Section 1685) to Article 13 (commencing with Section 1737), inclusive.
(4) Article 14 (commencing with Section 1750).
(b) In any references in the provisions made applicable to the home protection contract limited lines agent by subdivision (a), as applied for purposes of this chapter, the following terms have the following meanings:
(1) “Production agency” means a home protection contract limited lines agent.
(2) “Business of insurance” means the transaction of home protection contracts.
(c) A property and casualty insurance agent shall not act as an agent of a home protection company to transact home protection contracts through, or in connection with, a utility pursuant to this chapter, unless a home protection company has filed with the commissioner a notice of appointment, executed by the home protection company, appointing the property and casualty insurance agent as the home protection company’s agent. The authority to transact home protection contracts given to a property and casualty insurance agent by a home protection company shall be effective as of the date the notice of appointment is signed. An appointment made under this subdivision shall by its terms continue in force until either of the following occur:
(1) The cancellation or expiration of the license applied for or held at the time the appointment is filed.
(2) A notice of termination is filed by the home protection company, in accordance with Section 1707.
(d) The home protection contract limited lines agent shall be subject to the production agency records regulations adopted by the commissioner pursuant to Section 1727.
(e) If there is a conflict between the provisions made applicable by this section and this part, this part shall prevail.
(a) A home protection company that transacts home protection contracts pursuant to this chapter shall maintain a single insurance policy covering 100 percent of the home protection company’s contractual obligations associated with the home protection contracts. Except as provided in subdivision (h), the insurance policy shall be submitted to and approved by the commissioner prior to use. The policy shall be issued by an insurer admitted in this state and authorized by the commissioner to issue that insurance in this state or by a nonadmitted insurer subject to Section 1763. The insurance required by this subdivision shall be subject to both of the following:
(1) The insurer shall, at the time the policy is filed with the commissioner, and continuously thereafter, have an AM Best Financial Strength Rating of B++ or better, maintain surplus as to policyholders and paid-in capital of at least fifteen million dollars ($15,000,000).
(2) The policy shall provide that all purchasers of home protection contracts in this state transacted pursuant to this chapter shall be entitled to satisfaction by the insurer of all obligations arising under home protection contracts of the named home protection company, only upon the existence of both of the following conditions:
(A) The home protection company is unable, refuses, or otherwise fails to satisfy an obligation arising under the home protection contract within 60 days of the date the purchaser submits proof of loss to the home protection company.
(B) The purchaser provides written notice to the insurer that the home protection company has failed to comply with an obligation under the home protection contract.
(b) A home protection company that transacts home protection contracts subject to subdivision (a) shall allow claims to be filed against the insurance described under this section.
(c) An insurer’s liability under a policy submitted pursuant to this section shall not be negated or otherwise diminished by a failure of the home protection contract vendor, home protection contract limited lines agent, property and casualty insurance agent, home protection company, or affiliates of these entities to report the issuance of a home protection contract or to remit moneys to another person pursuant to a contractual agreement. The policy shall state that payment of the protection contract fee by the purchaser for a home protection contract insured by the policy is deemed payment to the insurer.
(d) (1) An insurer that has issued an insurance policy pursuant to subdivision (a) shall deliver written notice to the commissioner at least 30 days before the effective date of any cancellation or nonrenewal of the policy.
(2) If the policy that has been submitted to the commissioner pursuant to this section is canceled or nonrenewed, expires, or is no longer valid, the home protection company named on the policy shall do either of the following:
(A) Submit a copy of a new policy to the commissioner, before the termination of the prior policy, providing no lapse in coverage following the termination of the prior policy.
(B) Take immediate action to discontinue the sale and marketing of home protection contracts by home protection contract vendors until a new insurance policy is filed and approved by the commissioner pursuant to subdivision (a).
(e) When protection contract fees are being collected on behalf of the home protection company, and an insurer cancels the policy associated with that home protection company, unless a new policy becomes effective and has been accepted and acknowledged by the commissioner, the home protection company shall do both of the following:
(1) Make all reasonable efforts to secure a new payment method from affected customers.
(2) Discontinue the collection of protection contract fees through the home protection contract vendor’s utility bill within 180 days of the cancellation of the policy.
(f) This section shall not relieve a home protection company from any obligation incurred under home protection contracts issued prior to the date the policy was terminated.
(g) The commissioner may issue a cease and desist order pursuant to Section 1065.2 to a home protection company that violates this section. The powers vested in the commissioner by this section are in addition to any and all other powers and remedies vested in the commissioner by law, and nothing herein shall be construed as requiring the commissioner to employ the powers conferred in this section instead of or as a condition precedent to the exercise of any other power or remedy vested in the commissioner.
(h) Notwithstanding subdivision (a), a home protection company may satisfy the requirements of this section through the use of an insurance policy that covers 100 percent of the home protection company’s contractual obligations in this state. A copy of the insurance policy shall be provided to the department with the home protection company’s annual statement.
The commissioner may adopt, amend, or repeal regulations to implement the provisions of this chapter.
This chapter shall become operative on July 1, 2027.