Insurance Journal’s Top 10 West Region Stories of 2019

By | January 2, 2020

California wildfires dominated the news in Insurance Journal’s Western region in 2019, despite it being a quiet year relative to two consecutive years of deadly blazes that came before.

Three of the year’s top 10 most read stories on IJ West were related to California wildfires. Other top stories of 2019 included a lawsuit involving the JonBenet Ramsey case, a $13 million lawsuit filed against a fitness chain over a man who died on a treadmill, two stories on large fines levied on insurers, a major acquisition and a story on a Hawaii volcano alert.

It wasn’t coverage of ongoing wildfires that pulled in readers the past year, but coverage of the impacts of fires over the previous two years that seemed to pique the interest.

Fueled by drought, and buildup of dry vegetation and extreme winds, California experienced the deadliest and most destructive wildfires in state history in 2017 and 2018, costing more than 100 lives, and destroying thousands of homes.

The past year the state saw 6,872 incidents and an estimated 253,321 acres burned, according to the California Department of Forestry & Fire Protection. CalFire reports more than 1.9 million acres burned in 7,639 incidents in 2018, and more than 1.5 million acres in 9,270 incidents in 2017.

Despite the respite in 2019, CalFire notes the fire season across the West is starting earlier and ending later each year, with climate change named as “a key driver” of the trend.

“Warmer spring and summer temperatures, reduced snowpack, and earlier spring snowmelt create longer and more intense dry seasons that increase moisture stress on vegetation and make forests more susceptible to severe wildfire,” CalFire states. “The length of fire season is estimated to have increased by 75 days across the Sierras and seems to correspond with an increase in the extent of forest fires across the state.”

A plague of power outages in 2019 may have helped keep the bygone blazes on top of reader’s minds.

The last of the year’s numerous outages toward the end of November caused roughly 50,000 homes and businesses across Northern California to be without power. The planned outage was instituted by utility Pacific Gas & Electric Co. to guard against risk of wildfire during dry, windy weather.

Following are the 10 most read stories in Insurance Journal’s Western region:

1. Brother of JonBenet Ramsey Settles Colorado Lawsuit with CBS

The brother of long-ago slain Colorado child beauty queen JonBenet Ramsey settled a lawsuit he filed against CBS Corp. over a documentary theorizing that he killed her.

Burke Ramsey’s attorney, Lin Wood, declined to disclose the terms.

JonBenet Ramsey was found bludgeoned and strangled in the basement of their parents’ Boulder, Colorado, home on Dec. 26, 1996, touching off a media frenzy.

No one has ever been charged for the murder.

A four-hour CBS documentary aired in two parts in September, 2016, amid a flurry of media accounts ahead of the 20th anniversary of JonBenet’s death. At the conclusion of the CBS show, a panel of experts said it had formed the opinion that Burke Ramsey, who was 9 at the time of the killing, struck JonBenet in the head with a heavy object.

The group said it believed the parents, John and Patsy Ramsey, then staged the crime scene to make it appear an intruder was the culprit.

Two months later Burke Ramsey sued CBS, the production company that produced the show, and the experts who re-examined the case, seeking $250 million in compensatory damages $500 million in punitive damages.

2. $13M Suit Filed Against Fitness Chain After Oregon Man Dies on Treadmill

A $13 million lawsuit was filed against a fitness center chain after a 62-year-old Oregon man collapsed and died while running on a treadmill.

The lawsuit filed in Oregon by the man’s wife claims the 24 Hour Fitness in Portland failed to train the only employee on duty how to respond to the emergency and how to find the automated external defibrillator.

The lawsuit says another gym member searched for the employee to call 911 and bring out the defibrillator after David Rutledge collapsed in December 2017.

The suit says the employee didn’t immediately call 911 and didn’t know where the defibrillator was.

Oregon law requires health clubs to have defibrillators on hand.

3. Auto-Owners to Acquire Capital Insurance Group in California

Auto-Owners Insurance entered into a definitive agreement to acquire Monterey, Calif.-based Capital Insurance Group.

Auto-Owners Insurance Group is headquartered in Lansing, Mich. Auto-Owners is a multiline property/casualty insurer operating through independent agencies in 26 states.

Capital Insurance Group insures personal lines and commercial and agricultural businesses in California, Washington, Oregon, Nevada and Arizona.

Philo Smith & Co. was the exclusive financial advisor to Auto-Owners.

Terms of the deal were not disclosed.

4. California Commissioner Orders FAIR Plan to Increase Homeowners Coverage Options

California Insurance Commissioner Ricardo Lara kicked off a battle in November when he ordered the California Fair Plan Association to begin offering a comprehensive policy, known as HO-3 coverage, in addition to its current dwelling fire-only coverage by June 1, 2020. The comprehensive plan is to include traditional homeowner features, such as coverage for water damage, personal liability and theft.

Lara also ordered the FAIR Plan to increase coverage limits and to offer a no-fee monthly payment plan, as well as allow for policyholders to pay by credit card or electronic funds transfer without any fees. The new payment options should be available to policyholders no later than Feb. 1, 2020, the commissioner’s order states.

Lara noted the growing lack of availability of homeowners and fire insurance has touched virtually every county in the state and threatens home values, real estate transactions, tax revenues, emergency services, and the integrity of California communities.

Fair Plan officials in December filed a petition for a writ of mandate seeking to have a court annul, vacate, or withdraw Lara’s order calling for the Fair Plan to begin offering HO-3 coverage, a move that was followed by Lara issuing a revised plan of operation for the California FAIR Plan that furthers his orders.

5. California’s $27.6M Fine Against Mercury Insurance Remains After Court Action

The state’s highest court ruled a $27.6 million fine imposed against Mercury Insurance Co. for improperly tacking fees onto auto insurance policies will stand.

The California Department of Insurance reported on Aug. 15 that the California Supreme Court denied a petition for review by Mercury Insurance, thereby keeping in place a $27.6 million fine the department imposed on Mercury for charging illegal fees in violation of Proposition 103.

The fine is the largest in the department’s history against a property/casualty insurer.

In 2015, Mercury was fined $27.6 million for charging consumers unapproved and unfairly discriminatory rates.

Proposition 103, passed by the voters in 1988, prevents auto insurers from charging excessive rates and requires that rates be approved by the commissioner.

The department said that Mercury illegally labeled its “agents” as “brokers,” implying that they worked for the consumers rather than Mercury, and allowed them to charge and collect unapproved fees on more than 180,000 transactions from 1999 to 2004, improperly collecting at least $27,593,562 from consumers.

Mercury issued a statement saying the carrier believes the court, and that the fees were charged and collected by independent brokers for the services they provided to their customers, and that the fees were disclosed upfront and customers agreed to pay those fees.

6. Alert Level Raised for Large Hawaii Volcano

Officials in July raised the alert level for the world’s largest active volcano, Hawaii’s Mauna Loa, which last erupted in 1984.

The U.S. Geological Survey changed the level from “normal” to “advisory” following a steady increase in earthquakes and ground swelling that began in March.

The volcano alert raised eyebrows, as just a little over a year earlier Kilauea Volcano erupted and destroyed more than 700 homes. The mess from that destruction continued on into this year, including a federal class action lawsuit alleging that Lloyd’s of London and its affiliated insurance brokers steered homeowners throughout the state away from comprehensive home insurance coverage established by the state, and that as a result many of these homeowners were left with policies that had lava exclusions.

The July alert for Mauna Loa at the time said an eruption wasn’t imminent, but that scientists were closely monitoring it because of its reputation for “evolving very quickly” and sending lava far and wide.

Mauna Loa, which has erupted 33 times since 1843, quieted down following the alert.

7. Thousands of Lawsuits Demanding PG&E Pay for Damages from Wildfires

More than 1,000 lawsuits were filed since late 2017 demanding Pacific Gas & Electric Corp. pay for damages caused by wildfires.

The lawsuits represent thousands of people, companies, cities and counties affected by fires.

They range from a rancher’s $3,000 small claims complaint to insurance companies’ demands for billions of dollars to reimburse their payouts to policyholders. Cities and counties are suing PG&E for destroyed schools, parks and other public property in addition to the cost of responding to the fires.

At the time, PG&E lawyers filed denials of responsibility in the courts. A lot has changed since. The results of a probe by a state regulator released in early December concluded PG&E Corp. did not properly inspect and replace transmission lines before a faulty wire sparked a wildfire that killed more than 80 people in 2018.

When the corporation filed for bankruptcy protection, it said these and other lawsuits could ultimately cost it $30 billion.

PG&E Corp.’s creditors in late December sweetened their offer to California wildfire victims, saying they are now prepared to pay $13.5 billion in cash upfront.

California Gov. Gavin Newsom said on Dec. 13 that a proposed settlement had lacked major changes in governance and tougher safety enforcement mechanisms mandated under the state wildfire statute. It would also leave the company with a weakened capital structure and “limited ability to withstand future financial and operational headwinds.”

8. California Commissioner Calls for Statewide Non-Renewal Moratorium, More Measures to Protect Wildfire Victims

California Insurance Commissioner Ricardo Lara in December issued a mandatory one-year moratorium on insurance companies non-renewing policyholders, a move he said will help at least 800,000 homes in wildfire disaster areas in Northern and Southern California.

The commissioner’s action was the result of Senate Bill 824, which he authored in 2018 while he was a state Senator, to give temporary relief from non-renewals to residents living near a declared wildfire disaster.

It was first time the California Department of Insurance invoked the new law, which took effect in January.

Lara also called on insurance companies to voluntarily cease all non-renewals related to wildfire risk statewide until Dec. 5, 2020, in the wake of Gov. Gavin Newsom’s declaration of statewide emergency due to fires and extreme weather conditions.

A statewide moratorium would provide all California homeowners, renters, and businesses peace of mind, and allow time for stakeholders to come together to work on lasting solutions, help reduce wildfire risk, and stabilize the insurance market, according to Lara.

The mandatory one-year moratorium covers 800,000 homes in ZIP codes adjacent to recent wildfire disasters under SB 824, also known as the Wildfire Safety and Recovery Act.

A spokesperson for the American Property Casualty Insurance Association, the largest trade group representing insurers, said the answer to the state’s wildfire crisis is better preparedness, not measures that could jeopardize the solvency of insurers.

9. Arch Insurance Says Policy Doesn’t Cover USC’s $215M Sex Abuse Settlement

Arch Specialty Insurance Co. argued in a lawsuit that it shouldn’t have to cover the University of Southern California’s $215 million settlement in a case in which the school’s gynecologist was accused of sexual assault because a policy it issued to the university includes an abuse or molestation exclusion.

The settlement may cause major changes at USC. Attorneys for women who said they were sexually abused by a longtime gynecologist at the school said the settlement includes groundbreaking campus reforms.

The lawsuit filed by Arch concerns excess healthcare professional liability policies for 2017 and 2018 with a limit of $10 million of liability for each of the two periods at issue. Each of the Arch policies provides insurance excess of $100 million in underlying coverage provided by several different insurance carriers, according to the lawsuit.

The suit was filed on Aug. 9 in the U.S. District Court of Central California. It alleges that as the 2017-18 policy was expiring in May 2018, USC learned that the Los Angeles Times planned to run a story accusing the university of allowing Dr. George Tyndall to continue practicing as a gynecologist in the Student Health Center despite him being accused repeatedly of misconduct toward young patients over several years.

“Recognizing that lawsuits were sure to be filed in the wake of this story, USC’s insurance broker Chivaroli & Associates, Inc. (“Chivaroli”) suddenly contacted Arch and demanded on behalf of USC – without revealing the impending allegations about Dr. Tyndall – that Arch amend its policy to delete the Abuse or Molestation Exclusion,” the lawsuit states.

Hundreds of students and alumni accused Tyndall of committing sexual or inappropriate conduct during physical exams. Tyndall denied the allegations.

10. $10M Penalty in Wells Fargo California Case, Can’t Do New Business Until at Least 2020

Wells Fargo in January agreed to pay a $10 million penalty as part of a settlement agreement with the California Department of Insurance.

The settlement with the CDI resolves the department’s accusation alleging improper insurance sales practices related to Wells Fargo’s online insurance referral program. The improper practices reportedly resulted in consumers being signed up and charged for insurance products without their consent.

Wells Fargo agreed to not transact any new business during the remaining term of its two insurance licenses, which expire in July and September 2020. The company also agreed to not apply for a license for at least two years following the expiration of their current licenses.

The $5 million of the penalty is due immediately. If the company ever seeks to return to the California insurance marketplace, it then must pay the remaining $5 million penalty. The CDI may also decline to issue a new license.

In November 2017, the CDI served on Wells Fargo an accusation seeking revocation of Wells Fargo’s insurance license for improper insurance sales practices. The accusation was the result of an investigation opened at the direction of Jones, which found that from 2008 to 2016, Wells Fargo customers were issued roughly 1,500 insurance policies without their knowledge or permission.

In some cases, employees told consumers to enter their personal information on a policy application merely to receive a quote, but Wells Fargo employees later submitted the application to the insurer to purchase the policy without the consumer’s permission.

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