Appellate Court Dismisses Challenge To CDI Replacement Costs Regulation

May 3, 2012

The California Court of Appeal summarily dismissed a legal challenge by the Association of California Insurance Companies and the Personal Insurance Federation of California to homeowner protection regulations adopted by the California Department of Insurance last summer. The case now returns to Superior Court for final resolution.

Insurance Brokers & Agents of the West has also filed a brief in the case, arguing that CDI and Jones overstepped their authority, and that this move could be an inroads to enabling the regulators to wield a broader authority over more than just those entities in homeowners insurance.

CDI issued the new homeowners’ insurance regulations to address the problem of underinsurance, and because the department says that customers were confused about what a “replacement cost” estimate actually covers.

“I’m pleased the Court of Appeal summarily rejected two insurance company trade associations’ interim challenge to the department’s homeowners replacement cost regulations,” Insurance Commissioner Dave Jones said in a statement. “These regulations are an important protection for homeowners and address the widespread problem of underinsurance. They reduce confusion at the point of sale by requiring insurers that offer replacement cost estimates to provide complete information.”

Gene Livingston, with Greenberg Traurig LLP who he represented PIFC and ACIC, noted that the court only rejected a petition and issued no decision.

“It is discretionary with the court of appeal as to whether it accepts our petition or not. It is not like an appeal where the court has no discretion of whether to resolve the issue or not, and any decision is usually on the merits,” he said in an email replying to a request for comment. “No decision was made by the court of appeal about the merits of our challenge to the regulation. We return now to the trial court in January and will ask it to rule on the merits.Only seven percent of petitions to review interim orders are granted.”

The Court of Appeal summarily dismissed ACIC and PIFC’s petition for review of the trial court’s dismissal of their motion for judgment on the pleadings. The matter now goes back to the trial court for final resolution. Trial is set for January 2013.

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