California Insurance Commissioner Prevails in Insurance Industry’s Legal Challenge

January 24, 2017

In a 7-0 decision, the California Supreme Court has affirmed the authority of Insurance Commissioner Dave Jones in a legal challenge brought by the insurance industry, the California Department of Insurance announced.

Rejecting the insurance industry’s arguments, the Supreme Court ruled the insurance commissioner has broad discretion to adopt rules and regulations as necessary to promote the public welfare.

The insurance industry lost their challenge to Jones’ consumer protection regulations that require insurers replacement cost estimates actually reflect the complete cost of rebuilding a policyholder’s home after a fire.
“We have won an important victory for California consumers over the insurance industry with the Supreme Court’s decision today upholding our consumer protection regulation,” said Insurance Commissioner Dave Jones in a departmental release. “The Supreme Court rejected the insurance industry’s effort to strike down the department’s regulation, which protects consumers from misleading insurer estimates of home replacement costs, which left homeowners without adequate coverage or ability to rebuild their homes after fires.”

“Climate change, years of drought, and more devastating wildfires have changed the landscape of California and led to a year-round fire season. This regulation offers homeowners peace of mind, should disaster strike,” Jones added.

The commissioner said the regulations were needed because insurance companies were misleading consumers by giving them incomplete home replacement cost estimates, sometimes by removing key components from the actual estimates they calculated, in order to undercut competitors with lower premium.

The practice unfairly left consumers who relied on their insurers’ estimates unaware they were underinsured, and many could not rebuild after fires destroyed their homes.

The insurance industry, led by the Association of California Insurance Companies and the Personal Insurance Federation of California, used its lawsuit challenging the regulation to challenge the insurance commissioner’s authority to adopt regulations that protect consumers from insurers’ unfair and misleading practices.

While the insurance industry did not argue insurers would have difficulty complying with the regulation, or that the general rule requiring all insurers’ replacement-cost estimates include all costs necessary to replace a home is a bad idea, the industry argued that the regulation was overreaching by the commissioner.

Source: California Department of Insurance

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Topics California Carriers Legislation Market

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