News Briefs

June 6, 2005

AIA OPPOSES CALIF. BILL TO LIMIT HOME INVENTORIES: A bill approved by the California Senate May 25 that prevents insurers from requiring claimants to itemize personal property lost in a disaster is well intended, but will invite padding of claims and raise costs for all policyholders, according to the American Insurance Association. SB 2, authored by Senator Jackie Speier (D), will also require insurers to give policyholders a copy of their loss history report, which is duplicative and eventually costly to all policyholders. “The author is trying to help people recover after a disaster, but in reality this bill goes against the fundamentals of how insurance works and will drive up costs for everyone,” said Janine Gibford, AIA assistant vice president, Western region. “Responsible policyholders maintain home inventories to determine what could be lost and potentially need to be replaced under their policy. This bill says insurers should pay up to 85 percent of contents coverage, regardless of whether the homeowner had that much property. Insurance is intended to indemnify for actual losses. The inventory is a tool to account for and replace damaged personal property. If insurers are required to automatically pay a pre-specified limit, regardless of what is lost, the cost of insurance will go up for everyone, and it is simply unfair to responsible consumers. SB 2 would also require insurers to provide copies of loss history reports to policyholders. The author has tried to improve the bill, but unfortunately we continue to disagree on a few key provisions in the measure. We will continue to try to find middle ground on SB 2 as it moves through the legislative process.” SB 2 was approved in the Senate by a vote of 23 to 14. The bill now moves to the Assembly for consideration.

PRO-BUSINESS INSURANCE BILL TOPS ARIZ. LEGISLATIVE SESSION: Legislation that will allow business owners to lower their insurance costs highlighted the action on insurance-related measures during the recently concluded Arizona legislative session, according to Sam Sorich, regional vice president of the Property Casualty Insurers Association of America. “The pro-business bill is HB 2192. It will give businesses a cost-saving option in electing their fire insurance coverage that does not now exist. Under the current law, all commercial fire policies must include coverage for acts of terrorism,” Sorich said. “HB 2192, which was sponsored by PCI, will allow business owners to purchase fire policies without the terrorism coverage and, thereby, lower their premiums.” The bill was signed into law by the governor on April 25. The Legislature this session also approved: SB 1089, which would require the impound of vehicles if the drivers have had their driving privileges revoked. Insurers would not be required to cover the cost of the impoundment. The governor has until May 25 to act on the bill. SB 1420, which increases the penalties for failure to comply with the financial responsibility requirements, was signed into law on April 18. SB 1251, which allows the awarding of punitive damages and attorney fees in liability cases involving abuse by an elder care provider, was signed into law April 18. HB 2190, which makes it clear that at least one person in any office where surplus lines insurance is transacted must hold a surplus lines brokers license, was signed into law May 9. The bills signed into law by the governor will become effective Aug. 12, 2005. The only exception is HB 2190, part of which becomes effective June 30, 2005.

INSURERS LOSE IN STRINGFELLOW ACID PITS JURY TRIAL: Insurance companies must pay to clean up a hazardous waste dump, the Stringfellow Acid Pits. A Riverside County, California jury on May 16, 2005 found in favor of the State of California and against CNA, Wausau, Yosemite, Horace Mann (ACE), and Stonebridge Life Insurance Company. The jury determined that there is coverage for the State of California for the clean-up of the Stringfellow Acid Pits. The jury rejected all coverage defenses raised by the insurance companies including “willful acts” under Section 533 of the California Insurance Code, concealment and lost policy defenses. The jury found that CNA, Wausau, Yosemite, Horace Mann (ACE) and Stonebridge each breached their insurance contracts with the State. After judgment and monetary damages are entered in favor of the State of California for the clean-up of the Stringfellow Acid Pits for the insurance companies’ breach of contract, the case now will proceed to resolution of the State of California’s bad faith claims against CNA, Wausau, Yosemite, Horace Mann (ACE), and Stonebridge again by jury trial in Riverside, California. The jury trial began on March 21, 2005. Jury deliberations began on May 12, 2005. There have been numerous settlements by other insurance companies of the State of California’s Stringfellow claims before the trial. Lloyd’s, Fireman’s Fund, OneBeacon, Unigard, Chubb, Peerless, Highlands, St. Paul, TIG, Hartford, and others all settled prior to the jury trial. AIG and General Re/North Star settled during the jury trial. The State of California will receive in excess of $121 million in settlements from the insurance companies that settled rather than suffering the adverse jury verdict.

HAWAII LEGISLATURE TO STUDY NCOIL P/C MODERNIZATION ACT: “Hawaii’s legislative decision to conduct a study of the NCOIL Property/Casualty Insurance Modernization Act suggests that the state legislature is committed to making strides toward rate modernization, which will promote market competition in the insurance industry that will benefit insurance consumers,” stated National Association of Mutual Insurance Companies’ State Affairs Manager Christian J. Rataj. HCR 83 authorizes the insurance commissioner to convene a working group to review the NCOIL Property/Casualty Insurance Modernization Act, as amended Nov. 21, 2003. The working group is comprised of the Directors of the Department of Commerce and Consumer Affairs and the Department of Business, Economic Development, and Tourism, members of the insurance industry, the Hawaii Insurers Council, and Consumer Lawyers of Hawaii. The insurance commissioner is to report the working group’s findings to the Legislature no later than 20 days before the convening of the regular session of 2006. The Legislature also tabled HB 214 that would have authorized “open rating” for rate reductions by the insurance industry, opening the way for the study of the NCOIL Act. NAMIC will continue to advocate for rate modernization throughout the country, and will work with the Hawaii Insurers Council, to promote a regulatory environment that promotes the ideals of market competition.

ACIC OPPOSES EXTENDING LOW COST AUTO PROGRAM: Without first conducting a thorough evaluation, it is premature to expand California’s low-cost auto insurance program from two counties to the entire state, according to the Association of California Insurance Companies. “Expanding statewide now is too big of a jump and too soon without knowing the impact and the need for such a program in all 58 California counties. Therefore, we are opposing the legislation,” said ACIC President Sam Sorich. The proposed expansion is contained in legislation, SB 20 by Sen. Martha Escutia (D-Whittier) that is pending on the Senate floor. The pilot, low-cost program would be available statewide beginning April 1, 2006, if the bill is signed into law this year. The existing program is available now only in Los Angeles and San Francisco counties.”Without more definitive information on the pilot program’s experience and the program’s impact on California consumers, the program should not be expanded to other counties. Moreover, there should be a study to determine whether the low-cost program is really needed or desirable for drivers in additional counties,” Sorich said. He pointed out that as of Dec. 31, 2003, 9,665 policies were written in the program’s two counties. Last year, 7,202 new policies were written, a marked increase in the program’s participation. “The impact of this recent change in the program’s business should be analyzed before there is a final decision on whether to expand the program,” Sorich said. In addition to expanding the program statewide, SB 20 would change the program’s scheduled Jan. 1, 2007 sunset to Jan. 1, 2012 and increase the value of cars eligible for the program from $12,000 to $20,000. “There may be merit in considering an increase in the $12,000 limit. However, SB 20’s proposed increase to $20,000 is too great. A more modest increase should be considered,” Sorich said.

Topics California Carriers Legislation Property Market Property Casualty Hawaii

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