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AIA Pleased with Results of 2005 Calif. Legislative Session

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The California legislature adjourned sine die on Thursday, Sept. 8, 2005, and the American Insurance Association is pleased with the overall results.

“When the session began in January, insurers faced numerous onerous measures that would have increased the cost of insurance for California consumers,” said Ken Gibson, AIA vice president, Western Region. “While the session was highly partisan and distracted by initiative politics, AIA successfully negotiated workable amendments and lobbied to stop the most egregious bills targeted at the insurance industry.”

“AIA and the insurance industry’s efforts defeated measures that would have improperly mandated community investment, regulated producer compensation, and banned the use of credit-based information by insurers. We also fought back legislation which imposed ill-advised changes to security breach notification laws and re-regulated workers’ compensation rates,” said Gibson. “AIA also joined forces with the Civil Justice Association of California and the business community to stop the plaintiff bar’s agenda to create new private rights of action and undermine use of confidential settlements.”

Personal Lines Issues

“Insurance Commissioner John Garamendi (D) introduced an aggressive package of bills to regulate the valuation and underwriting processes in homeowners and auto insurance,” said Janine Gibford, AIA assistant vice president. “AIA and the industry effectively negotiated with the California Department of Insurance to ensure that a meaningful, but reasonable, legislative package moved to the governor’s desk.”

“The new laws approved by the legislature will require agent education on homeowners valuation, and a mandate following a state-declared disaster to provide copies of policies to consumers within 30 days and an extension of Additional Living Expenses to 24 months,” said Gibford. “Homeowners and auto insurers will also be required to notify consumers why an adverse underwriting decision was made during theapplication or renewalprocess. AIAwas also successful in negotiating amendments to a low-cost auto insurance program measure thatwill requirethe insurance commissioner to hold public hearings and prove a need before the program is expanded further.”

Commercial Issues

“A partial deal was reached between contractors, subcontractors and insurers to eliminate type-one indemnity contracts,” said Steve Suchil, AIA assistant vice president, Western Region. “More negotiations are expected to deal with ongoing construction dispute issues in California,” added Suchil. “AIA also successfully lobbied to stop any attempts to weaken the 2004 workers’ compensation reforms, including two measures designed to undermine the newly established medical provider networks.”

Gov. Arnold Schwarzenegger (R) now has until Oct. 9, 2005, to sign or veto the legislative measures on his desk. The California legislature will return in January 2006.

Major Bills Stopped in 2005

AB 528 (Frommer) – Private right of action in environmental violations

AB 925 (Ridley Thomas) – Mandatory community investment

AB 1700 (Pavley) – Confidential settlements

SB 46 (Alarcon) – Workers’ compensation rate regulation

SB 538 (Kuehl) – Medical Provider Networks

SB 603 (Ortiz) – Ban on credit scoring

SB 757 (Chan) – Medical Provider Networks

SB 938 (Dunn) – Producer compensation

Personal and Commercial Lines Legislation Sent to the Governor

AB 758 (Calderon) – Construction disputes

AB 873 (Bogh) – Provide copy of policy within 30 days

SB 2 (Speier) – Agent education

SB 20 (Escutia) – Low cost auto insurance

SB 150 (Escutia) – Explanation of adverse action

SB 518 (Kehoe) – Extends to 24 months for ALE in a state-declared disaster


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