Committee advances bill to require insurers to pay replacement cost less depreciation up front

Senate Health and Public Affairs Committee members voted to recommend Senate Bill 55, 9–1, sending it to the Judiciary Committee. The bill would require insurers to pay the replacement cost less depreciation at the time of settlement, with the remaining replacement-cost amount paid when repair or replacement work is completed.

Supporters told the committee the measure aims to reduce repeat claims and stabilize insurance rates. "If there's a claim out there, say it's a hail claim, the insurance company is paying out the insurance claim currently up to replacement cost. And when the person receives the funds, they utilize those funds to do something else," Senator Jacob Ramos said in his presentation to the committee. Melissa Robertson, property and casualty bureau chief at the Office of Superintendent of Insurance (OSI), said some companies are depreciating claims more than statute permits and that the bill clarifies how insurers must pay out.

Backers and several committee members described examples where insured property owners were paid and did not complete repairs, then later filed additional claims. "We've had some bad actors in the industry that are not taking the depreciation — they're actually depreciating the actual cash value," Robertson said. Supporters argued the bill would require an insurer to initially pay replacement cost minus depreciation and then release any remaining replacement-cost funds after work is completed.

Opponents and skeptical members pressed whether the problem described was already illegal or addressed by existing consumer-protection statutes. Senator Antoinette Sadia Lopez said the behavior outlined—filing a second claim after being paid for the first—would be insurance fraud under current law. "That is insurance fraud," she said. Senator Lopez added she was not convinced the bill clearly identified a problem the legislation would remedy and said the bill as written could shift burdens onto policyholders who lack funds to start repairs.

Committee exchange included practical questions about normal claims practice. Robertson and Elizabeth Johnson, associate general counsel for the superintendent of insurance, said adjusters and insurers often work directly with contractors, use photo and drone evidence, and pay contractors during rebuilds. Supporters maintained the bill would limit instances where insureds receive funds and never use them for promised repairs, which proponents contend contributes to higher premiums.

Senators asked about inflation adjustments, replacement-cost endorsements and treatment of catastrophe situations where rebuilding may take years. Senator Charlie asked for clearer language to account for inflation; Senator Ramos said he would work to add explicit inflation language in subsequent committee drafts.

The committee approved the motion for a do-pass recommendation on a 9–1 roll call, with Senator Sergio Lopez recorded as the lone no vote. The measure now moves to the Judiciary Committee for further consideration.

Votes at a glance: Senator Hickey moved a do-pass recommendation; Senator Block seconded. Roll call (as recorded at the hearing): Block (Aye), Boone (Yes), Charlie (Yes, with explanation), Gallegos (No recorded during discussion but voted earlier as present), Nava (Yes), Pinto (recorded), Scott (Yes), Sergio Lopez (No), Hickey (Yes), Lopez (Yes). Outcome: do pass to Judiciary, 9–1.

Supporters said the bill is intended to protect consumers and reduce insurer exposure to repeated claims; critics said existing fraud statutes and claims processes already address many of the problems described and asked for more precise statutory language, including on inflation.