California Sen. Noreen Evans, D-District 2, has introduced legislation to grant explicit authority to the state Insurance Commissioner to order restitution as part of an administrative enforcement action against an insurance company. If passed, Senate Bill 631 would give the commissioner “unprecedented new powers to punish broker-agents and other licensees ‘in all instances’ where he finds any violation of the California Insurance Code,’ according to Insurance Brokers and Agents of the West (IBA West).
Existing law permits the commissioner to order restitution only in limited circumstances. The commissioner regularly finds that, as a result of legal violations, Californians are entitled to refunds or restitution, but in many circumstances, the commissioner has no specific authority to order refunds or restitution, according to the bill text.
“The Insurance Commissioner does not have the authority to order insurers to restore out-of-pocket expenses or money wrongfully obtained due to insurer misconduct. This needs to change, and it needs to change now,” Commissioner Dave Jones said.
“David and Goliath” dynamics can occur when a consumer seeks repayment for wrongful insurance company conduct, said Evans, who chairs the Senate Judiciary Committee and the Legislative Women’s Caucus.
“The status quo allows insurance companies to violate the law and then simply nudge consumers away from regaining the monetary losses they experienced,” she said. “Restitution-granting authority already exists in several other state departments. SB 631 extends this same authority to the Insurance Commissioner and simultaneously provides built-in safeguard for all parties.”
Evans said the bill also provides safeguards for insurers should they disagree with the restitution order by the Insurance Commissioner, because under SB 631 insurers may still seek a judicial appeal and go to court. Should a consumer wish to directly pursue judicial action against an insurer, rather than receiving restitution through the Insurance Commissioner, the bill still allows them to do so, she added.
Yet IBA West said it is concerned because persons entitled to receive restitution are defined so broadly as to include insurance companies — meaning broker or agents could conceivably be required to pay restitution to their own insurers in the event of even minor violations of Insurance Code or regulatory provisions. The association also is concerned that the bill lacks “meaningful” limits on the Commissioner’s ability to impose financially devastating punishments.
The bill would permit parties who’ve been ordered to pay restitution to file a civil lawsuit against the Department of Insurance, but that remedy would be beyond the financial ability of many broker-agents to exercise, said Steve Young, IBA West general counsel.
“IBA West will strongly oppose this legislation unless the Commissioner can explain not only why it is needed, but also why he should be given unfettered discretion to impose arbitrary and excessive penalties,” Young said.
IBA West has asked the Commissioner to provide more information on the proposal.
Evans’ Second Senatorial District includes all or portions of the counties of Humboldt, Lake, Mendocino, Napa, Solano, and Sonoma.
Topics California Carriers Agencies Legislation
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