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home / insurance / in the media
Jun 23, 2004
by Jim Sanders, Bee Capitol Bureau
Insurance bill would limit dropping of policyholdersLisza Pontes was one of the lucky ones - her family and home survived.
But long after the flames died in last year's savage Southern California wildfires, Pontes claims she was victimized again - this time by her insurance carrier.
The firm canceled her homeowners policy after paying a $50,000 claim for fire-related damage to the family home in San Diego County, she said.
Pontes contacted company after company seeking a new policy.
Seventeen denials later, "I'm now looking for some help here," Pontes said Tuesday at a Sacramento press conference promoting a package of homeowner-related bills sponsored by state Insurance Commissioner John Garamendi.
A linchpin of the package, SB 1474, would restrict the ability of insurance companies to rescind policies, raise premiums or eliminate any policy discounts in response to claims filed.
Proposed by Sen. Martha Escutia, D-Whittier, SB 1474 will be heard today by the Assembly Insurance Committee.
Specifically, SB 1474 would bar insurance firms from penalizing homeowners under the following circumstances:
* Claims stemming from fires that were not started on the policyholder's property.
* Claims resulting from floods, earthquakes, lightning or other weather-related events in which the policyholder was not negligent.
* Claims that were filed but were not paid or payable under the policy.
* Claims for which, prior to loss, a policyholder had reduced risk by removing the potential hazard or repairing the identified defect.
"Without these kinds of assurances, all of us are really at the whim of the dictates of the insurance companies," said Tony Alfaro, whose home was destroyed in the Southern California wildfires.
Insurance industry representatives said proponents of SB 1474 are using the wildfires as a guise to push for changes they've sought for years.
A similar bill was introduced months before last year's firestorm destroyed more than 3,600 homes, causing more than $2 billion in damage. The legislation died.
"Only one provision in (SB 1474) relates to these fires - or any kind of catastrophe," said Sam Sorich, president of the Association of California Insurance Companies.
Passage of SB 1474 could send the price of homeowner policies skyrocketing statewide, he said.
"We know, as insurance professionals, that a past claim is an indicator of whether or not there's going to be a future claim," Sorich said.
SB 1474 would force homeowners with a perfect record to subsidize people who "treat their policy like a home-maintenance contract," he said.
One firm estimated that Escutia's legislation could spark a 23 percent premium increase for homeowners who have filed no claims the past three years, Sorich said.
Particularly troublesome is the provision barring retaliation if a claim stems from a hazard that the homeowner tried to remedy, he said.
"A person has a Doberman," he said. "The Doberman bites somebody. So the person gets rid of the Doberman. Technically, the cause of the loss has been remedied. ... But the person goes out and buys a pit bull."
Jerry Davies, communications director for the Personal Insurance Federation of California, said SB 1474 could increase the liability of insurance firms with no guarantee that Garamendi would agree to a commensurate rate hike.
Industry officials said refusing to renew a policy after a firestorm is based on underwriting risk and is not meant as punishment.
Firms may decide that the potential for subsequent fires is too high in areas where brush is high, roads are narrow, firefighting services are lax and water supply is limited, they said.
No homeowner is forced to go without insurance. The state provides policies - albeit at higher prices - when homeowners can't obtain insurance from private firms.
Garamendi dismissed claims that SB 1474 would hike premiums statewide as "baloney."
"If the situation emerges where you can't use (your policy) because you're afraid you'll lose it, that's wrong," he said.
Garamendi said the insurance industry is "determined to kill this bill because they want unilateral authority to do anything they please."
Proponents said SB 1474's prospects appear bleak in the Assembly Insurance Committee. The powerful insurance industry carries considerable lobbying clout throughout the Capitol.
The Foundation for Taxpayer and Consumer Rights released an itemized list Tuesday of more than $500,000 in campaign contributions the past two years by the insurance industry to members of the 17-person Assembly committee.
Doug Heller, executive director of the foundation, said retaliation for filing insurance claims should be "totally out of bounds."
"No consumer would sign up for a company that was going to drop them simply for using the policy that was sold to them," he said.
The Bee's Jim Sanders can be reached at (916) 326-5538 or firstname.lastname@example.org
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