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This story first appeared on May 04, 1998

Trial Lawyers Throw “Election-Year Bomb”
Activity heats up as deadline for bills nears

By Liz Harman


  “The ugliest bill since Royal Globe.” That’s how Personal Insurance Federation spokesman Jerry Davies described the unfair claims practices bill sponsored by Assemblyman Wally Knox, D-Santa Monica, that comes up before the Assembly Insurance Committee this week.

  Among AB 2322’s provisions are a requirement that every insurer, upon a claimant’s request, supply a copy of all materials contained in the claims file, underwriting file and agent’s file concerning the claimant’s file, prompting fears that it would make it easier to gather evidence and sue insurers.

  The bill would also amend the standard fire insurance policy form to require insurers to demand an appraisal within 60 days after a residential property loss claim or lose their right to demand an appraisal. If the insurer demands appraisal, the insurer would be required to pay any award within 30 days.

  The bill “creates a lot of onerous disclosure requirements on the part of insurers,” said Phyllis Marshal, PIF’s senior legislative counsel. “It basically takes a simple claim and turns it into a lawsuit from day one.”

  “A political bomb thrown in the arena” by trial lawyers and their allies in an election year is how Barry Carmody, president of the Association of California Insurance Companies, described the bill.

  Officials from the Consumer Attorneys of California (CAOC) couldn’t be reached for comment.

  Despite the trial bar’s strong support for the bill, some think it’s too extreme to win passage in the Assembly and Senate. “Insurers can make a compelling argument against it” that will not be lost on moderate Democrats, said Elizabeth Story, spokeswoman for the Western region of the American Insurance Association.

  But as crunch time in the Legislature approaches, opposition by the trial attorneys may help doom prospects for several other bills supported by insurance groups.

  While there’s a lot of activity, as the May 8 deadline for passing legislation out of the policy committees in the Assembly and Senate nears, the end result may be little more than stalemate, said the ACIC’s Carmody. “History tells us not to look to an election year for productive changes in public policy.”

  One measure, AB 1869, which also comes up this week, would improve the response time in disasters and emergencies by setting up insurer disaster teams that would be allowed immediate access to the scene and prepare a report for the public and the insurance commissioner.

  While supporters, including the National Emergency Management Association, say it would enhance cooperation between state insurance departments, disaster response agencies and the like, trial lawyers argue the bill would allow insurers to appear to be acting as public officials. They also say the teams would not be “balanced” with consumer or CDI representatives.

  Another measure, SB 1670, would make it easier to fight insurance fraud by consolidating the fraud reporting and immunity provisions into a single article within the California Insurance Code. While the National Insurance Crime Bureau and the California District Attorneys Association support it, the CAOC opposes it.

  Insurers, however, aren’t in complete agreement over bills soon to come up for votes. PIF and the AIA find themselves on opposite sides over a bill designed to improve the settlement process for construction defect claims before a suit is filed. Under AB 1950, the pre-litigation settlement process could be extended from the current 90 days to a maximum of 180 days. Contrary to its intended purpose, current law has led to lengthy pre-litigation processes, as critics say the 90-day timeline can be endlessly extended. AB 1950 would also include subcontractors in the settlement process.

  PIF argues that the measure will only increase the obligations and cost to insurers in defending policyholders, while AIA says the bill’s language has been amended to limit insurers’ duties to their present form. The bill has cleared the Assembly Judiciary Committee and has now made it to the Assembly floor.

  Numerous other measures are already making their way through the legislative process. Some of note include:

  • SB 1551 would double the amount of civil penalties for the failure to make timely notices to workers and payment of workers’ compensation benefits. The Senate Industrial Relations Committee has already approved the bill, which would increase the penalty to a minimum of $200 and a maximum of $10,000. Critics say the bill is based on a flawed study by the Division of Workers’ Comp that exaggerates problems with benefit or notice delivery.
  • AB 1660, which would require agent and broker licensing exams to be scored within 14 days and licenses issued within seven days thereafter to those who passed, failed to pass the Assembly Insurance Committee. The Agents and Brokers Legislation Council (ABL), the Professional Insurance Agents (PIA) and the California Department of Insurance opposed the bill, saying it would be difficult to comply with the requirements and that the best way to address licensing issues is within the task force set up by the CDI.


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