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home / insurance / in the media

The San Diego Union-Tribune
Jun 23, 2004

by Steve Lawrence, ASSOCIATED PRESS

Bill sought by fire victims rejected by Assembly panel

SACRAMENTO -- Despite pleas from the insurance commissioner and Southern California fire victims, an Assembly committee Wednesday rejected a bill that would bar insurers from refusing to sell or renew homeowners' polices because of damage caused by natural disasters.

The measure lost on a 6-3 vote in the Insurance Committee even though the author, Sen. Martha Escutia, D-Norwalk, agreed to make last-minute changes in an attempt to gain support. It needed at least nine votes to pass the 17-member committee.

Opponents said they were concerned the bill could trigger overall increases in homeowner's insurance rates, but a consumer group blamed the measure's defeat on $500,000 in insurance industry campaign contributions to committee members in 2003-04.

"The insurance industry plays the game that fire survivors can't afford to," said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights. "It's a tragedy that the stories of these survivors can't be heard over the clanging of insurance industry donations."

The bill started out Wednesday as a measure that would have barred insurers from refusing to sell or renew a policy or imposing a surcharge because of claims that were triggered by:

-- Fires that started off the homeowner's property.

-- Floods, earthquakes, lightning and other weather-related events instead of negligence by the homeowner.

The measure also would have prevented insurers from denying coverage or imposing a surcharge in cases in which claims weren't paid for some reason and when the homeowner made repairs or removed hazards that eliminated the possibility of more damage.

Escutia agreed to limit the bill to cover claims stemming from natural disasters and fires that were triggered a state of emergency but that still didn't bring enough votes.

Insurance Commissioner John Garamendi said the bill would help eliminate a "use-it-and-lose-it syndrome" that made many homeowners fearful of filing legitimate claims because they might lose their insurance policies.

"It is absolutely wrong in every sense of the word that an insurance company uses this mechanism to discourage a person from filing a legitimate claim," he said. "Why in the world do you buy this stuff if the company's not going to pay this claim?"

Liza Pontes of Lakeside said her homeowner's insurance wasn't renewed and her request for insurance was turned down by 17 companies even though she had only a small claim after wildfires ravaged much of rural Southern California last year.

"There was zero fault on my part for this fire," she told the committee. "Insurance is necessary in California. I believe in insurance. I never thought that insurance would be a privilege I would be denied. What did we do wrong?"

Pontes said some committee members were "not courteous" to her during their conversations about the bill and seemed beholden to insurance companies. "You quoted their words like they were gospel. ... I feel I am leaving here as an insurance victim."

Diane Colborn, a lobbyist for the Personal Insurance Federation, said she sympathized with the fire victims but that the bill would result in higher overall insurance charges.

"It essentially tells companies who they have to sell to ... and what they can charge," she said. "It will require base rates to increase for the vast majority of policy holders, who would have to pay more to subsidize customers who have multiple claims."

John Norwood, a lobbyist for insurance agents, contended insurers had "no ongoing obligation" to continue to write coverage for a particular customer after paying off a claim.

He also said the need for the bill had been eliminated by an improvement in the "very hard market for homeowners' insurance" that existed in California two years ago. "We have a very good marketplace right now. It has been recovering and it has been competitive."

Voting for the amended bill were Assembly members John Benoit, R-Bermuda Dunes, Ron Calderon, D-Covina, Rebecca Cohn, D-Saratoga, Lou Correa, D-Anaheim, Dario Frommer, D-Los Angeles, and Paul Koretz, D-West Hollywood.

Assemblymen Dave Cox, R-Fair Oaks, Dennis Mountjoy, R-Monrovia, and Juan Vargas, D-San Diego, voted no, according to committee records.

Eight other committee members -- Russ Bogh, R-Beaumont, Manny Diaz, D-San Jose, John Dutra, D-Fremont, Jerome Horton, D-Inglewood, George Nakano, D-Torrance, Keith Richman, R-Chatsworth, Mark Ridley-Thomas, D-Los Angeles, and Mark Wyland, R-Del Mar -- either were absent or didn't vote, the committee staff said.
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On the Net: Read the bill, SB1474, at www.senate.ca.gov and www.assembly.ca.gov


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