HB-5862, As Passed House, December 17, 2014HB-5862, As Passed Senate, December 17, 2014

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5862

     A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending sections 102, 2227, and 2845 (MCL 500.102, 500.2227,

and 500.2845), section 102 as amended by 2000 PA 252, section 2227

as added by 1998 PA 217, and section 2845 as amended by 1998 PA

216.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 102. As used in this act:

     (a) (1) "Commissioner" as used in this act means the

commissioner of the office of financial and insurance

services.director.

(b) (2) "Department" as used in this act means the office of

financial and insurance services.department of insurance and

financial services.

     (c) "Director" means, unless the context clearly implies a

different meaning, the director of the department of insurance and

financial services.

     Sec. 2227. (1) If a claim is filed for a loss to insured real

property due to fire, explosion, vandalism, malicious mischief,

wind, hail, riot, or civil commotion and a final settlement is

reached on the loss to the insured real property, an insurer shall

withhold from payment 25% of the actual cash value of the insured

real property at the time of the loss or 25% of the final

settlement, whichever is less. For Until December 31, 2014, for

residential property, the 25% settlement or judgment withheld shall

not exceed $6,000.00 adjusted annually beginning June 1, 1999 in

accordance with the consumer price index. Beginning January 1,

2015, for residential property, the 25% settlement or judgment

withheld shall not exceed $12,000.00 adjusted January 1 of each

year in accordance with the consumer price index. The commissioner

director shall notify annually all insurance companies transacting

property insurance in this state as to the new adjusted amount. At

the time that 25% of the settlement or judgment is withheld, the

insurer shall give notice of the withholding to the treasurer of

the city, village, or township in which the insured real property

is located, to the insured, and to any mortgagee having an existing

lien or liens against the insured real property, if the mortgagee

is named on the policy. In the case of For a judgment, notice shall

also be provided to the court in which judgment was entered. The

notice shall must include all of the following:

     (a) The identity and address of the insurer.

     (b) The name and address or forwarding address of each

policyholder, including any mortgagee.

     (c) Location The location of the insured real property.

     (d) The date of loss, policy number, and claim number.

     (e) The amount of money withheld.

     (f) A statement that the city, village, or township may have

the withheld amount paid into a trust or escrow account established

for the purposes of this section if within 15 days after the

mailing of the notice the city, village, or township states that

the money should be withheld to protect the public health and

safety; otherwise, the withheld amount shall be paid to the insured

15 days after the mailing of the notice.

     (g) An explanation of the provisions of this section.

     (2) In order for For a city, village, or township to escrow

the amount withheld by the insurer, and to retain that amount, the

following procedure shall be used:

     (a) An authorized representative of the city, village, or

township shall request the insurer to pay the withheld amount into

an escrow account maintained by the treasurer of the city, village,

or township. A final settlement that exceeds 49% of the insurance

on the insured real property is prima facie evidence that the

damaged insured structure violates existing health and safety

standards of the city, village, or township and constitutes cause

for the escrowing of the withheld amount as surety for the repair,

replacement, or removal of the damaged structure.

     (b) In the case of For a settlement, the request under

subdivision (a) shall be sent to the insurer with a copy to the

insured and any mortgagees. The copy to the insured shall must

contain the notice required under subdivision (d). Upon On receipt

of the request, the insurer shall forward the withheld amount to

the treasurer of the city, village, or township, and shall provide

notice of the forwarding to the insured and any mortgagees.

     (c) In the case of For a judgment, the request under

subdivision (a) shall be sent to the insurer with a copy to the

insured, any mortgagees, and the court in which judgment was

entered. The copy to the insured shall must contain the notice

required under subdivision (d). Upon the On motion of the city,

village, or township, the court shall order the withheld amount

transmitted to the treasurer of the city, village, or township.

     (d) The city, village, or township shall notify the insured

that the insured has 10 days from the date of the mailing of the

notice to object to the city's, village's, or township's retention

of the withheld amount. The notice shall must identify the

authorized representative of the city, village, or township that to

whom the insured should address his or her objections to and shall

must state that the insured may do either of the following:

     (i) Seek resolution with the representative of the city,

village, or township designated to receive and resolve objections

under this section. The city, village, or township shall make a

final determination and shall notify the insured of that

determination not later than 30 days after receipt of notice that

the insured wishes to seek resolution under this subparagraph. This

final determination shall include notice to the insured that if the

insured is still dissatisfied with the city's, village's, or

township's determination, the insured may seek relief in circuit

court.

     (ii) Seek relief in the circuit court.

     (3) Upon receipt of money and information from an insurer as

prescribed in subsections (1) and (2), the local treasurer shall

record the information and the date of receipt of the money and

shall immediately deposit the money in a trust or escrow account

established for the purposes of this section. The account may be

interest-bearing. If the a mortgage on the insured property is in

default, the treasurer of the city, village, or township, upon

written request from a the first mortgagee of the property, with

respect to which policy proceeds were withheld and placed into a

trust or escrow account under subsections (1) and (2) and this

subsection, shall release to the mortgagee all or any part of the

policy proceeds received by the city, village, or township with

respect to that property, not later than 10 days after receipt of

the written request by the mortgagee, to the extent necessary to

satisfy any outstanding lien of the mortgagee.

     (4) Except as provided in subsection (7), money deposited in

an account pursuant to under subsection (3) shall not be commingled

with city, village, or township funds. Any interest earned on money

placed in a trust or escrow account shall may be retained by the

city, village, or township to defray expenses administrative costs

incurred under this section.

     (5) Except as provided in subdivision (c), the policy proceeds

deposited under subsection (3) shall immediately be forwarded to

the insured when the authorized representative of the city,

village, or township designated by the governing body of the city,

village, or township receives or is shown reasonable proof of any

of the following:

     (a) That the damaged or destroyed portions of the insured

structure have been repaired or replaced, except to the extent that

the amount withheld under this subsection section is needed to

complete repair or replacement.

     (b) That the damaged or destroyed structure and all remnants

of the structure have been removed from the land on which the

structure or the remnants of the structure were situated, in

compliance with the local code requirements of the city, village,

or township in which the structure was located.

     (c) That the insured has entered into a contract to perform

repair, replacement, or removal services for the insured real

property and that the insured consents to payment of funds money

directly to the licensed contractor performing the services upon

completion. Funds Money released under this subdivision may be

forwarded only to a licensed contractor performing services on the

insured property.

     (6) Reasonable proof required under subsection (5) includes

any of the following:

     (a) Originals or copies of pertinent verifiable contracts,

invoices, receipts, and other similar papers evidencing both the

work performed or to be performed and the materials used or to be

used by all contractors performing repair, replacement, or removal

services with respect to for the insured real property, other than

House Bill No. 5862 as amended December 17, 2014

a licensed contractor subject to subdivision (b).

     (b) An affidavit executed by the licensed contractor that has

performed the greatest amount of repair or replacement work on the

structure, or that has done most of the clearing and removal work

if structure repair or replacement is not to be performed. The

licensed contractor shall attach to the affidavit all pertinent

contracts, invoices, and receipts and shall swear that these

attached papers correctly indicate the nature and extent of the

work performed to date by the licensed contractor and the materials

used.

     (c) An inspection of the insured real property to verify that

repair, replacement, or clearing has been completed in accordance

with subsection (5).

     (7) If Except as otherwise provided in this subsection, if

with respect to a loss, reasonable proof is not received by or

shown to an authorized representative of the city, village, or

township designated by the governing body of the city, village, or

township within 120 days after the policy proceeds portion was

received by the treasurer, the city, village, or township shall use

the retained proceeds to secure, repair, or demolish the damaged or

destroyed structure and clear the insured property in question, so

that the structure and property are in compliance comply with local

code requirements and applicable ordinances of the city, village,

or township. Any The city, village, or township shall return to the

insured any unused portion of the retained proceeds. shall be

returned to the insured. The city, village, or township may extend

the 120-day time period listed in under this subsection. <<A city,

House Bill No. 5862 as amended December 17, 2014

village, or township may retain and use policy proceeds for

demolishing any property if on or before the effective date of the

amendatory act that added this sentence the authorized representative

had not received or been shown reasonable proof within 1 year after

the insurer provided notice to the insured under subsection (1) and

the insured property has been demolished.

>> The insured may file a civil action against

the city, village, or township for the return of the policy

proceeds. An action filed under this subsection must be filed

within 3 years after the insurer provided notice to the insured

under subsection (1) or 1 year after the effective date of the

amendatory act that added this sentence, whichever is later.

     (8) There is no liability on the part of, and a cause of

action does not arise against, an insurer or an agent or employee

of an insurer for withholding or transferring money in the course

of complying or attempting to comply with this section. If there is

a dispute with a lienholder concerning the distribution of an

amount withheld from payment under this section, the insurer may

file an action in circuit court to identify all parties that may

have a financial interest in the withheld amount and to determine

how the withheld amount should be distributed.

     (9) This section applies only to property located in a city,

village, or township described in subsection (12) if the city,

village, or township pursuant to under a resolution by its

governing body notifies the commissioner director in writing that

the city, village, or township has established a trust or escrow

account to be used as prescribed in this section and intends to

uniformly apply this section with respect to all property located

within the city, village, or township following written

notification to the commissioner. director. The commissioner

director shall prepare and distribute a list of all cities,

villages, and townships that have elected to apply this section to

all insurance companies transacting property insurance in this

state.

     (10) A city, village, or township may apply to be added to the

list prepared under subsection (9) by making a written request for

addition to the commissioner. director. When a written request for

addition from a city, village, or township has been received by the

commissioner, director, an amended list shall be prepared and

distributed indicating the addition. The addition shall be is

effective on the date specified by the commissioner director in the

amendment. The commissioner director shall notify the city,

village, township, and insurance companies of the effective date of

the addition which shall be effective not less than 30 days after

receipt of notice by the insurance company. A city, village, or

township shall not apply this section to any loss that occurred

before the effective date of the addition.

     (11) A city, village, or township may request to be deleted

from the list prepared under subsection (9) or may cease to apply

this section for a period of not less than 6 months upon not less

than 30 days' written notice to the commissioner. director. After

receipt of a request to be deleted from the list, the commissioner

director shall prepare and distribute an amendment to the list

indicating the deletion. The deletion shall be is effective on the

date specified by the commissioner director in the amendment. The

commissioner director shall notify the city, village, township, and

insurance companies of the effective date of the deletion which

shall be effective not less than 30 days after receipt of the

notice by the insurance company. A city, village, or township shall

continue to apply this section to any loss that occurred before the

effective date of the deletion, notwithstanding the deletion.

     (12) This section applies only to insured real property

located in cities, villages, and townships that are located in

counties with a population of 425,000 or more and to insured real

property located in cities, villages, and townships that are

located in counties with a population of less than 425,000 if the

city, village, or township has a population of 50,000 or more. This

section applies to insured real property located in a city,

village, or township that has elected to apply this section as

provided in subsection (9) or (10) or that has been included in

this section as provided in subsection (13).

     (13) Cities, villages, and townships located in counties with

a population of 425,000 or more and cities, villages, and townships

that are located in counties with a population of less than 425,000

if the city, village, or township has a population of 50,000 or

more and that are on the list prepared by the commissioner director

under section 2845(9) or (10) on October 1, 1998 are automatically

included as participants in the procedure established in this

section unless the city, village, or township makes a written

request to be deleted pursuant to under subsection (11).

     (14) The commissioner director shall prepare and distribute to

all insurance companies transacting property insurance in this

state by November 1, 1998 new lists indicating which cities,

villages, and townships are subject to this section and which

cities, villages, and townships are subject to section 2845.

     (15) The withholding requirements of this section do not apply

if all of the following occur:

     (a) Within 15 days after agreement on a final settlement

between the insured and the insurer, the insured has filed with the

insurer evidence of a contract to repair as described in subsection

(6).

     (b) The insured consents to the payment of funds money

directly to the licensed contractor performing the repair services.

Funds Money released under this subdivision may be forwarded only

to a licensed contractor performing the repair services on the

insured property.

     (c) On receipt of the contract to repair, the insurer gives

notice to the city, village, or township in which the property is

situated located that there will not be a withholding under this

section because of the repair contract.

     (16) If the insured and the insurer have agreed on the

demolition costs or the debris removal costs as part of the final

settlement of the real property insured claim, the insurer shall

withhold 1 of the following sums, amounts, whichever sum is the

largest, and shall pay that sum amount in accordance with this

section:

     (a) The agreed cost of demolition or debris removal.

     (b) Twenty-five percent Until December 31, 2014, 25% of the

actual cash value of the insured real property at the time of loss

so long as if this amount for residential property does not exceed

$6,000.00 adjusted annually beginning June 1, 1999 in accordance

with the consumer price index.

     (c) Beginning January 1, 2015, 25% of the actual cash value of

the insured real property at the time of the loss if this amount

for residential property does not exceed $12,000.00 adjusted

January 1 of each year in accordance with the consumer price index.

(d) (c) Twenty-five percent Until December 31, 2014, 25% of

the final settlement of the insured real property claim so long as

if this amount for residential property does not exceed $6,000.00

adjusted annually beginning June 1, 1999 in accordance with the

consumer price index.

     (e) Beginning January 1, 2015, 25% of the final settlement of

the insured real property claim if this amount for residential

property does not exceed $12,000.00 adjusted January 1 of each year

in accordance with the consumer price index.

     (17) This section applies only to final settlements that

exceed 49% of the insurance on the insured real property.

     (18) If an insurer withholds payment under a policy in good

faith because of suspected arson, fraud, or other question

concerning coverage, this section does not apply until the issue or

question is resolved and final settlement is made.

     (19) As used in this section:

     (a) "Consumer price index" means that term as defined in

section 2080.

     (b) "Final settlement" means a determination of the amount due

and owing to the insured for a loss to insured real property, but

does not include contents damage, losses to personal property, or

additional coverage not contained in the building coverage portion

of the fire insurance policy, which determination is made by any of

the following means:

     (i) Acceptance of a proof of loss by the insurer.

     (ii) Execution of a release by the insured.

     (iii) Acceptance of an arbitration award by both the insured and

the insurer.

     (iv) Judgment of a court of competent jurisdiction.

     (c) "Home insurance" means that term as defined in section

2103.

     (d) "Residential property" means property on which home

insurance can be issued.

     Sec. 2845. (1) If a claim is filed for a loss to insured real

property due to fire or explosion and a final settlement is reached

on the loss to the insured real property, an insurer shall withhold

from payment 25% of the actual cash value of the insured real

property at the time of the loss or 25% of the final settlement,

whichever is less. For Until December 31, 2014, for residential

property, the 25% settlement or judgment withheld shall not exceed

$6,000.00 adjusted annually beginning June 1, 1999 in accordance

with the consumer price index. Beginning January 1, 2015, for

residential property, the 25% settlement or judgment withheld shall

not exceed $12,000.00 adjusted January 1 of each year in accordance

with the consumer price index. The commissioner director shall

notify annually all insurance companies transacting property

insurance in this state as to the new adjusted amount. At the time

that 25% of the settlement or judgment is withheld, the insurer

shall give notice of the withholding to the treasurer of the city,

village, or township in which the insured real property is located,

to the insured, and to any mortgagee having an existing lien or

liens against the insured real property, if the mortgagee is named

on the policy. In the case of For a judgment, notice shall also be

provided to the court in which judgment was entered. The notice

shall must include all of the following:

     (a) The identity and address of the insurer.

     (b) The name and address or forwarding address of each

policyholder, including any mortgagee.

     (c) Location The location of the insured real property.

     (d) The date of loss, policy number, and claim number.

     (e) The amount of money withheld.

     (f) A statement that the city, village, or township may have

the withheld amount paid into a trust or escrow account established

for the purposes of this section if within 15 days after the

mailing of the notice the city, village, or township states that

the money should be withheld to protect the public health and

safety; otherwise, the withheld amount shall be paid to the insured

15 days after the mailing of the notice.

     (g) An explanation of the provisions of this section.

     (2) In order for For a city, village, or township to escrow

the amount withheld by the insurer, and to retain that amount, the

following procedure shall be used:

     (a) An authorized representative of the city, village, or

township shall request the insurer to pay the withheld amount into

an escrow account maintained by the treasurer of the city, village,

or township. A final settlement that exceeds 49% of the insurance

on the insured real property is prima facie evidence that the

damaged insured structure violates existing health and safety

standards of the city, village, or township and constitutes cause

for the escrowing of the withheld amount as surety for the repair,

replacement, or removal of the damaged structure.

     (b) In the case of For a settlement, the request under

subdivision (a) shall be sent to the insurer with a copy to the

insured and any mortgagees. The copy to the insured shall must

contain the notice required under subdivision (d). Upon On receipt

of the request, the insurer shall forward the withheld amount to

the treasurer of the city, village, or township, and shall provide

notice of the forwarding to the insured and any mortgagees.

     (c) In the case of For a judgment, the request under

subdivision (a) shall be sent to the insurer with a copy to the

insured, any mortgagees, and the court in which judgment was

entered. The copy to the insured shall must contain the notice

required under subdivision (d). Upon the On motion of the city,

village, or township, the court shall order the withheld amount

transmitted to the treasurer of the city, village, or township.

     (d) The city, village, or township shall notify the insured

that the insured has 10 days from the date of the mailing of the

notice to object to the city's, village's, or township's retention

of the withheld amount. The notice shall must identify the

authorized representative of the city, village, or township that to

whom the insured should address his or her objections to and shall

must state that the insured may do either of the following:

     (i) Seek resolution with the representative of the city,

village, or township designated to receive and resolve objections

under this section. The city, village, or township shall make a

final determination and shall notify the insured of that

determination not later than 30 days after receipt of notice that

the insured wishes to seek resolution under this subparagraph. This

final determination shall include notice to the insured that if the

insured is still dissatisfied with the city's, village's, or

township's determination, the insured may seek relief in circuit

court.

     (ii) Seek relief in the circuit court.

     (3) Upon receipt of money and information from an insurer as

prescribed in subsections (1) and (2), the local treasurer shall

record the information and the date of receipt of the money and

shall immediately deposit the money in a trust or escrow account

established for the purposes of this section. The account may be

interest-bearing. If the a mortgage on the insured property is in

default, the treasurer of the city, village, or township, upon on

written request from a the first mortgagee of the property, with

respect to which policy proceeds were withheld and placed into a

trust or escrow account under subsections (1) and (2) and this

subsection, shall release to the mortgagee all or any part of the

policy proceeds received by the city, village, or township with

respect to that property, not later than 10 days after receipt of

the written request by the mortgagee, to the extent necessary to

satisfy any outstanding lien of the mortgagee.

     (4) Except as provided in subsection (7), money deposited in

an account pursuant to under subsection (3) shall not be commingled

with city, village, or township funds. Any interest earned on money

placed in a trust or escrow account shall may be retained by the

city, village, or township to defray expenses administrative costs

incurred under this section.

     (5) Except as provided in subdivision (c), the policy proceeds

money deposited under subsection (3) shall immediately be forwarded

to the insured when the authorized representative of the city,

village, or township designated by the governing body of the city,

village, or township receives or is shown reasonable proof of any

of the following:

     (a) That the damaged or destroyed portions of the insured

structure have been repaired or replaced, except to the extent that

the amount withheld under this subsection section is needed to

complete repair or replacement.

     (b) That the damaged or destroyed structure and all remnants

of the structure have been removed from the land on which the

structure or the remnants of the structure were situated, in

compliance with the local code requirements of the city, village,

or township in which the structure was located.

     (c) That the insured has entered into a contract to perform

repair, replacement, or removal services for the insured real

property and that the insured consents to payment of funds money

directly to the contractor performing the services upon completion.

Funds Money released under this subdivision may be forwarded only

to a contractor performing services on the insured property.

     (6) Reasonable proof required under subsection (5) includes

any of the following:

     (a) Originals or copies of pertinent verifiable contracts,

invoices, receipts, and other similar papers evidencing both the

work performed or to be performed and the materials used or to be

used by all contractors performing repair, replacement, or removal

services with respect to for the insured real property, other than

a contractor subject to subdivision (b).

     (b) An affidavit executed by the contractor that has performed

the greatest amount of repair or replacement work on the structure,

or that has done most of the clearing and removal work if structure

repair or replacement is not to be performed. The contractor shall

attach to the affidavit all pertinent contracts, invoices, and

receipts and shall swear that these attached papers correctly

indicate the nature and extent of the work performed to date by the

contractor and the materials used.

     (c) An inspection of the insured real property to verify that

repair, replacement, or clearing has been completed in accordance

with subsection (5).

House Bill No. 5862 as amended December 17, 2014

     (7) If Except as otherwise provided in this subsection, if

with respect to a loss, reasonable proof is not received by or

shown to an authorized representative of the city, village, or

township designated by the governing body of the city, village, or

township within 120 days after the policy proceeds portion was

received by the treasurer, the city, village, or township shall use

the retained proceeds to secure, repair, or demolish the damaged or

destroyed structure and clear the insured property in question, so

that the structure and property are in compliance comply with local

code requirements and applicable ordinances of the city, village,

or township. Any The city, village, or township shall return to the

insured any unused portion of the retained proceeds. shall be

returned to the insured. The city, village, or township may extend

the 120-day time period listed in under this subsection. <<A city,

village, or township may retain and use policy proceeds for

demolishing any property if on or before the effective date of

the amendatory act that added this sentence the authorized

representative had not received or been shown reasonable proof

within 1 year after the insurer provided notice to the insured

under subsection (1) and the insured property has been demolished.

>> The insured may file a civil

action against the city, village, or township for the return of the

policy proceeds. An action filed under this subsection must be

filed within 3 years after the insurer provided notice to the

insured under subsection (1) or 1 year after the effective date of

the amendatory act that added this sentence, whichever is later.

     (8) There is no liability on the part of, and a cause of

action shall not arise against, an insurer or an agent or employee

of an insurer for withholding or transferring money in the course

of complying or attempting to comply with this section. If there is

a dispute with a lienholder concerning the distribution of an

amount withheld from payment under this section, the insurer may

file an action in circuit court to identify all parties that may

have a financial interest in the withheld amount and to determine

how the withheld amount should be distributed.

     (9) This section applies only to property located in a city,

village, or township described in subsection (12) if the city,

village, or township pursuant to a resolution by its governing body

notifies the commissioner director in writing that the city,

village, or township has established a trust or escrow account to

be used as prescribed in this section and intends to uniformly

apply this section with respect to all property located within the

city, village, or township following written notification to the

commissioner. director. The commissioner director shall prepare and

distribute a list of all cities, villages, and townships that have

elected to apply this section to all insurance companies

transacting property insurance in this state.

     (10) A city, village, or township may apply to be added to the

list prepared under subsection (9) by making a written request for

addition to the commissioner. director. When a written request for

addition from a city, village, or township has been received by the

commissioner, director, an amended list shall be prepared and

distributed indicating the addition. The addition shall be is

effective on the date specified by the commissioner director in the

amendment. The commissioner director shall notify the city,

village, township, and insurance companies of the effective date of

the addition which shall be effective not less than 30 days after

receipt of notice by the insurance company. A city, village, or

township shall not apply this section to any loss that occurred

before the effective date of the addition.

     (11) A city, village, or township may request to be deleted

from the list prepared under subsection (9) or may cease to apply

this section for a period of not less than 6 months upon not less

than 30 days' written notice to the commissioner. director. After

receipt of a request to be deleted from the list, the commissioner

director shall prepare and distribute an amendment to the list

indicating the deletion. The deletion shall be is effective on the

date specified by the commissioner director in the amendment. The

commissioner director shall notify the city, village, township, and

insurance companies of the effective date of the deletion which

shall be effective not less than 30 days after receipt of the

notice by the insurance company. A city, village, or township shall

continue to apply this section to any loss that occurred before the

effective date of the deletion, notwithstanding the deletion.

     (12) This section applies only to insured real property

located in cities, villages, and townships that are located in

counties with a population of less than 425,000 except that this

section does not apply to insured real property located in cities,

villages, and townships that are located in counties with a

population of less than 425,000 if the city, village, or township

has a population of 50,000 or more. This section applies to insured

real property located in a city, village, or township that has

elected to apply this section as provided in subsection (9) or

(10).

     (13) The withholding requirements of this section do not apply

if all of the following occur:

     (a) Within 15 days after agreement on a final settlement

between the insured and the insurer, the insured has filed with the

insurer evidence of a contract to repair as described in subsection

(6).

     (b) The insured consents to the payment of funds money

directly to the contractor performing the repair services. Funds

Money released under this subdivision may be forwarded only to a

contractor performing the repair services on the insured property.

     (c) On receipt of the contract to repair, the insurer gives

notice to the city, village, or township in which the property is

situated located that there will not be a withholding under this

section because of the repair contract.

     (14) If the insured and the insurer have agreed on the

demolition costs or the debris removal costs as part of the final

settlement of the real property insured claim, the insurer shall

withhold 1 of the following sums, amounts, whichever sum is the

largest, and shall pay that sum amount in accordance with this

section:

     (a) The agreed cost of demolition or debris removal.

     (b) Twenty-five percent Until December 31, 2014, 25% of the

actual cash value of the insured real property at the time of loss

so long as if this amount for residential property does not exceed

$6,000.00 adjusted annually beginning June 1, 1999 in accordance

with the consumer price index.

     (c) Beginning January 1, 2015, 25% of the actual cash value of

the insured real property at the time of the loss if this amount

for residential property does not exceed $12,000.00 adjusted

January 1 of each year in accordance with the consumer price index.

(d) (c) Twenty-five percent Until December 31, 2014, 25% of

the final settlement of the insured real property claim so long as

if this amount for residential property does not exceed $6,000.00

adjusted annually beginning June 1, 1999 in accordance with the

consumer price index.

     (e) Beginning January 1, 2015, 25% of the final settlement of

the insured real property claim if this amount for residential

property does not exceed $12,000.00 adjusted January 1 of each year

in accordance with the consumer price index.

     (15) This section applies only to final settlements that

exceed 49% of the insurance on the insured real property.

     (16) If an insurer withholds payment under a policy in good

faith because of suspected arson, fraud, or other question

concerning coverage, this section does not apply until the issue or

question is resolved and final settlement is made.

     (17) As used in this section:

     (a) "Consumer price index" means that term as defined in

section 2080.

     (b) "Final settlement" means a determination of the amount due

and owing to the insured for a loss to insured real property, but

does not include contents damage, losses to personal property, or

additional coverage not contained in the building coverage portion

of the fire insurance policy, which determination is made by any of

the following means:

     (i) Acceptance of a proof of loss by the insurer.

     (ii) Execution of a release by the insured.

     (iii) Acceptance of an arbitration award by both the insured and

the insurer.

     (iv) Judgment of a court of competent jurisdiction.

     (c) "Home insurance" means that term as defined in section

2103.

     (d) "Residential property" means property on which home

insurance can be issued.