Insurance Interest from California Wildfire Claims Must Go to Homeowners Under New Bill

In a move to bolster financial support for disaster victims, California state officials introduced legislation Monday that would require lenders to pay homeowners the interest earned when insurance settlements are held in escrow accounts.

The measure, announced jointly by Assemblymember John Harabedian, Democrat of Pasadena, and Gov. Gavin Newsom, would amend state law to require lenders to pay homeowners the interest earned on insurance payouts while properties are being rebuilt.

“Homeowners, not insurance companies, should receive the interest earned on their insurance payouts. Many Angelenos devastated by these wildfires have lost nearly everything; they are struggling and need every bit of financial support. This bill puts people over profits, ensuring that rightful insurance payments go to those who need them most,” said Assemblymember Harabedian.

Under existing California law, lenders must pay homeowners the interest earned on escrow accounts holding property taxes and insurance payments. However, this requirement does not extend to insurance settlements after disasters, which can remain in escrow for months or years during reconstruction, accumulating substantial interest.

“Homeowners rebuilding after a disaster need all the support they can get, including the interest earned on their insurance funds. This is a commonsense solution that ensures that they receive every resource available to help them recover and rebuild,” Governor Newsom said.

The legislation aims to achieve four objectives: ensure fairness by redirecting insurance fund interest to homeowners; provide additional financial support for wildfire victims’ recovery efforts; maintain existing regulatory framework by aligning with current escrow laws; and strengthen homeowners’ rights by standardizing the treatment of escrowed funds.

The Assembly policy committee will consider the bill in spring 2025. The legislation would affect residents throughout Harabedian’s 41st District — which encompasses La Cañada Flintridge, Pasadena, Altadena, Sierra Madre, Monrovia, Bradbury, San Dimas, La Verne, Claremont, Upland, Rancho Cucamonga, Oak Hills, Piñon Hills and Phelan — as well as wildfire victims across California.