Fire Insurance Bills Advance In Calif. Legislature

June 18, 2004

Prompted by last year’s devastating firestorms, insurance-related bills that would help future disaster victims are gaining momentum as they move through the Legislature, reports the Association of California Insurance Companies (ACIC).

“The experience from the Southern California fires has provided all of us with even greater insight for helping fire victims in the future,” said ACIC President Sam Sorich. “We are working with legislators and the authors of the key post-fire bills as they move through the Assembly and Senate.”

The two key bills are:

* AB 2199 (Assembly member Christine Kehoe, D-San Diego), which would set 12 months after the payment of actual cash value as the minimum time limit for the repair or rebuilding of damaged property covered by replacement cost policies.

An insurer would have to provide a six-month extension for good cause, if rebuilding work is not complete. The minimum time limit would be set at 24 months for losses resulting from a “state of emergency” declared by the governor. The Assembly-passed bill recently was approved by the Senate Insurance Committee and will be considered next by the full Senate.

* SB 64 (Sen. Jackie Speier, D-Hillsborough), which would establish a mediation program for disputes between policyholders and their insurers arising from claims resulting from a disaster that has been declared a “state of emergency” by the governor. The bill was passed by the Senate and approved by the Assembly Insurance Committee and will be considered next by the full Assembly.

“Mediation is a widely recognized and useful procedural tool for resolving disputes. Use of this tool by the Dept. of Insurance following a declared ‘state of emergency’ can be highly productive in expeditiously resolving the large number of claims precipitated by a disaster,” said Sorich.

He noted that the insured losses from last year’s fires are expected to top $2 billion. Insurers are now processing more than 19,000 claims, including 3,500 for homeowners whose homes were completely destroyed by the fire.

Meanwhile, there are a number of other pending bills that have nothing to do with the fires and were initially rejected last year. These measures, reinstated in the legislative process under the guise of post-fire measures, are opposed by ACIC and the insurance industry. The bills are scheduled to be heard by the Assembly Insurance Committee on June 23.

They include:

* SB 1315 (Sen. Deborah Ortiz, D-Sacramento), which would give the insurance commissioner the power to review insurance policy forms. The power would extend to all policies now in effect and new forms which insurers intend to use in the future. (see today’s SB 1315 article for additional information.)

* SB 1474 (Sen. Martha Escutia, D-Los Angeles), which would restrict an insurer’s consideration of past claims history when underwriting and rating coverages.

“This bill would force consumers who have good claims histories to pay more than they should for homeowners insurance,” said Sorich.

* SB 1323 (Sen. Ortiz), which would prohibit a homeowners insurer from using credit information for underwriting and rating insurance policies.

“This bill would hurt homeowners’ insurance availability and force insurers to charge rates that do not reflect the risk of loss,” said Sorich.

“SB 1323 would force insurance companies to ignore credit history as an underwriting tool and impose unfair rates on their customers. If credit-based insurance scoring is not used and rates inaccurately reflect anticipated insured losses, some customers would end up paying more for their coverage in order to subsidize higher risk individuals who file a disproportionate number of claims.”

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