Property and casualty insurers and agents and brokers alike can breathe a little easier after a recent California assembly committee hearing on June 26… if only for the time being. The hearing saw some interesting motions in reference to some of the industry’s pending senate bills.
Perhaps the most notorious, Senate Bill 1763, which would mandate insurers to cover mold, as well as create new disclosure requirements, was surprisingly dropped by author Senator Deborah Ortiz. Chalk one up for the insurers.
“We were there, and we were ready to aggressively lobby against the bill, because we see a lot of problems with it,” said Nicole Mahrt, public affairs director, for the western region of the American Insurance Association (AIA). “But the author came and she presented the bill briefly, and then she said she decided to drop it.
“She [said] she kind of felt that the committee had already made up its mind,” Mahrt added. Ortiz apparently felt opposition to the bill was just too strong, and dropped the bill for the time being. “There were agents there that were ready to testify against it because they’re not able to write any new homeowners business and they’re concerned about it… Insurers were not actually given an opportunity to present our side of it.”
Ortiz’s unexpected action is a small victory for insurers. Mahrt said that the AIA was pleased with the decision, “because we were very concerned about that bill, we thought that it would bring even more confusion and problems to an already troubled marketplace… Homeowners insurers are struggling with the rising claims and litigation, and commercial insurers are seeing problems arise out of it. Now workers’ compensation claims are being filed for the health effects of mold. And that’s very difficult because there are no industry practices or no standard science for the health effects of mold.” Mahrt added that although SB 1763 won’t be hanging over their heads in the coming months, she said the industry will still have to face and deal with the problems that are already associated with mold. “It by no means ends the situation.”
Although Ortiz dropped SB 1763, she has the option to revisit the issue again in the new year. “I think she feels strongly about it, although I don’t think she has the full picture of it. We will try to work with her,” said Mahrt.
Another measure that saw action June 26 was SB 1427, which expands the low-cost auto program in California. The bill, authored by Senator Martha Escutia, passed, which will carry the pilot program into 2006, much to insurers’ dismay.
“Insurers were opposed to it because what the bill does is it expands the program and makes it eligible to more people, but then it mandates a lower rate,” explained Mahrt. “Now, apparently the way the original statue was written, the insurance commissioner has the authority to lower or increase the rate based on data that’s reported to him by the program.
“The problem is that this is a pilot program and it’s been slow to get started. The outreach to publicize the program has been very ineffective and not targeted, so it’s not really been utilized by many, and we don’t have very much information about it. We don’t have good loss data; it’s all too preliminary. So it’s hard to evaluate the program.” Mahrt said that the AIA was in support of allowing the program time to develop, but to expand it at this time is pre-mature.
Lastly, SB 1678, a bill authored by Senator Richard Polanco, failed in a 7-7 vote.
The bill would have redefined the terms ‘actual cash value’ and ‘replacement cost’ in standard fire policies. “The reason it was killed, as I understand, it was that there was too many changes put in by the insurance company, and the author didn’t like where it was going,” said Robb Greenspann, principal at the Greenspann Company. “He let it get defeated and he’s going to reintroduce it again next year.”
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