SB 1315 Would Limit Consumer Choice, Violate California Constitution

The Association of California Insurance Companies (ACIC) is opposed to pending legislation, SB 1315, which would limit consumer choice on fire insurance policies and violate the California Constitution’s contract provisions.

The legislation, which will be considered April 29 by the Senate Insurance Committee, would provide that no fire insurance policy containing changes to the standard policy form could be issued unless first approved by the insurance commissioner. Additionally, the commissioner would be authorized by the bill to disapprove the policy forms retroactively.

SB 1315 by Sen. Deborah Ortiz (D-Sacramento) would “strangle competition in the marketplace by limiting consumer choice,” according to ACIC President Sam Sorich. He explained that insurers design policy coverages to meet the needs of their policyholders. If the coverages and forms are made uniform, consumer choices will be greatly reduced.

At the same time, SB 1315 could endanger insurers’ fiscal stability by allowing the commissioner to dictate what coverages will be offered without regard to companies’ ability to absorb the losses, according to Sorich.

Moreover, Sorich noted, the legislation also would violate Article 1, Section 9 of the California Constitution, which prohibits the Legislature from passing laws that impact contractual obligations.