Gov. Newsom Signs Bill Authored by Pasadena Assemblymember to Protect Fire Survivors’ Insurance Payouts

Gov. Gavin Newsom Friday signed legislation requiring lenders to pay homeowners interest on insurance proceeds held in escrow after property damage or loss.

Assembly Bill 439, known as the Disaster Interest Accrual Act, guarantees homeowners at least 2% annual interest on post-loss insurance payouts placed in escrow during rebuilding, which can take months or years.

“Homeowners rebuilding after a disaster need all the support they can get, including the interest earned on their insurance funds,” Newsom said in a statement. “I am proud to deliver this commonsense solution to ensure survivors receive every resource available to help them recover and rebuild.”

While California law has long required lenders to pay interest on escrowed funds for property taxes and insurance premiums, it did not extend to hazard insurance payouts — until now.

Assemblyman John Harabedian, D-Pasadena, who authored the bill, said the new law closes a loophole that allowed financial institutions to keep interest earned on disaster-related insurance funds.

“AB 493 makes sure homeowners — not banks — benefit from the interest on insurance payouts meant to help them recover after disaster,” Harabedian said in a statement.

Newsom signed the bill with an “emergency clause,” making it effective immediately.

Harabedian said the measure will provide critical relief to Los Angeles wildfire survivors and others statewide navigating disaster recovery.