Insurers Face Many Battles in Oregon

California’s $38 billion budget deficit garners lots of headlines and attention these days, but the state of Oregon is facing similar gridlock over how to solve their fiscal woes.

Oregon’s political environment is entirely split. Democrat Ted Kulongoski, a former insurance regulator, is the state’s new governor who is working hard to put together his first state budget. The House of Representatives is controlled by the Republican majority (35 to 25) and the State Senate is evenly split between Republicans and Democrats (15 to 15).

Like most states around the country, Oregon is facing budget problems. Democrats are proposing a $12.5 billion spending plan while Republicans are proposing an $11.5 billion spending plan. Governor Kulongoski is trying to find a compromise in the middle.

Given the difference between the proposed spending plans and available revenue, taxes have become a significant issue. Insurers were faced with HB 2836, which would assess a premium tax on all auto insurance policyholders. The proposal was designed to generate approximately $90 million in new revenue for the state’s coffers. The bill is currently being held in the House Judiciary Committee which has now adjourned for the year. However, the issue could still be voted upon in another measure. The question remains: is there enough support to get this new tax bill down to the governor’s office?

HB 3051 allows an insurer to recoup their Oregon Insurance Guaranty Association assessment through a surcharge on property and casualty insurance policies. The bill ensures sufficient resources are made available to the Office of the State Fire Marshall. The Fire Marshall enforces the fire code, investigates fires and promotes fire prevention education and outreach.

Like many other states, the Oregon Legislature is considering limitations on insurers’ use of credit-based scores. SB 260 originally banned the use of credit by insurers. Now the measure has been amended to limit the use of credit based information. The measure is currently being held in the House of Representatives Rules Committee. The bill allows, in combination with other underwriting factors, credit based information to be used to underwrite new applications but prohibits its use for cancellations or nonrenewals. At this point it is likely that this bill will move to Governor Kulongoski’s desk.

In response to the escalating costs of medical professional liability insurance, the Governor has proposed rate relief in the form of state-sponsored medical reinsurance coverage. The coverage would be limited to rural areas where doctors can no longer afford to practice. The plan is seen as a temporary fix until a long term solution can be reached. The proposal is included in HB 3630. Insurers have opposed the bill as a reinsurance mechanism and have been lobbying to make this a voucher program. The bill is currently in the Senate Judiciary Committee, and there are discussions of the bill being amended.

The biggest battle facing insurers in Oregon during the 2003 legislative session impacts commercial insurers that provide environmental liability coverage. The House of Representatives killed a bill, HB 3420, which expanded insurers’ liability for hazardous waste clean up. The victory of this bill’s defeat was short lived because the Senate amended a vehicle, SB 297, to include two of the provisions in the bill killed by the House.

The bill that is currently moving is sponsored by a prominent business in Oregon that is attempting to reverse various trial court decisions that limit insurers’ exposure to the cost of cleaning up hazardous waste. The bill was recently amended in the House Judiciary Committee and the changes are still under review. A cursory analysis of the amended bill continues to be adverse to insurers. For example, the bill would place more costs in the defense cost category to which policy limits are generally inapplicable. The measure establishes a lower standard of proof for lost policy cases than required for existing Oregon trail court precedent. Insurers believe that the courts are the better forum to allocate liability rather than statute. The courts interpret insurance policies based on all of the material insurance policy provisions and the facts relevant to the claims.

Officials in the Kulongoski Administration see this measure as important to economic development for Portland Harbor. If a bill goes to the governors’ desk it could be signed despite major opposition.

Term limits brought many new faces to the Oregon Legislature during the decade they were in place. This turn over and a new personality in the governor’s office has made the 2003 session a challenge for insurers to educate policy makers about the critical issues facing the industry.

As legislators continue to battle over how to close the budget gap, many bills are being changed. It will be several more months before the curtain will go down on this legislative session and insurers can calculate the industry’s wins and losses.

Jeanne Cain is the vice president of state affairs for the American Insurance Association (AIA). Learn more about AIA by logging onto www.aiadc.org.