Legislation & Court Cases

LEGISLATIVE UPDATE:  California Insurance Alert

The California Legislature is on a July 12th deadline set by Governor Gavin Newsom to enact a wildfire financing package designed to help PG&E to exit bankruptcy and to protect the bond ratings of other California investor owned utilities.  Utilities such as Southern California Edison and Sempra Energy’s San Diego Gas & Electric face junk bond ratings if the state fails to act.  Power lines are already sparking blazes early in this year’s wildfire season.

The state Senate passed SB 1054 on July 8th that would create a multibillion dollar fund that utility companies could borrow from to cover future wildfire liabilities.  It would also make it easier for them to recover costs from their customers.  The state Assembly has until July 12th, when a recess begins, to approve AB 1054.  Legislators and industrial rate payers have other items they want attached to the Governor’s plan.  AB 1054 has been tagged as an urgency bill, requiring a two-thirds vote.

California’s market for homeowners insurance, especially for homes in the Wildland-Urban Interface (WUI) is already challenged.  Homeowners have experienced rate increases, cancellations, and non-renewals.  There has been an increase in properties insured in the non-admitted market and in the FAIR Plan.  Some legislators plan to introduce at least three new proposals relating to availability, under-insurance, and non-renewals that would adversely affect residential property insurers appetite for writing insurance.

These bills include:  1) guaranteed renewal for home hardening up to 10 years, 2) an annual comprehensive replacement cost estimate to be prepared by the insurer, and 3) 11-month notice prior to non-renewal, even if the policy is written for less than one year.  These bills are in addition to proposals to increase the California Insurance Guarantee Fund (CIGA) cap from $500,000 to $1 million for coverage A and to increase the FAIR Plan maximum coverage from $1.5 million to $3 million.

Sources include: Insurance Journal July 10, 2019 and IIABCal Connect July 8, 2019

Submitted by Margaret S. Lamdagan

California Disaster Insurance Act Passes Key Committee

Legislation by that could lead California to consider buying insurance in the private market to cover rapidly increasing costs of fighting wildfires due to climate change cleared a key committee vote Tuesday.

Senate Bill 290, called the California Disaster Insurance Act, was authored by state Sen. Bill Dodd, D-Napa, and is co-sponsored by Insurance Commissioner Ricardo Lara and Treasurer Fiona Ma.

It aims to stabilize state budget costs from major disasters. SB 290 would authorize the governor, insurance commissioner, and treasurer to enter into an insurance policy that pays out when California has unexpected disaster costs.

The bill passed the Senate Governmental Organization committee on Tuesday. SB 290 now moves to the Senate Committee on Appropriations.

Lara said the law if passes it would enable the state to officially engage with the insurance industry and figure out how to pay the state’s pay skyrocketing firefighting costs – solutions could be found through insurance, reinsurance, issuing a bond or creating a parametric product, according to Lara.

“It works like home insurance, but for the state,” Lara told Insurance Journal in February as the bill was first introduced.

Dodd said climate change has led to devastating wildfires and the need for a strategy to reduce the strain that puts on the state’s coffers.

“Unpredictable disaster costs require large budget reserves and threaten cuts to critical programs,” Dodd said in a statement. “Allowing the state to invest in an insurance policy will provide predictability and limit taxpayers’ risk of increasing disasters costs.”

The federal government, the World Bank, and the state of Oregon have all used insurance to reduce the risk to taxpayers following disasters. Oregon purchased insurance protection against wildfire costs for nearly 40 years – spending $61 million on premiums and receiving $102 million in insurance payments, according a 2017 University of Idaho report.

The high claim figures were pushed up by back-to-back years in which the policy limits were reached at $25 million in claims both in 2013 and 2014. The following year the state paid $3.8 million in premiums but no claims were triggered.

California has seen the cost of fighting wildfires grow to record levels over the past decade. California spent $947 million in 2017-18 through the emergency fund for firefighting – nearly $450 million more than budgeted, according to Cal Fire. The costs of fighting wildfires have overrun Cal Fire’s emergency budget in seven of the last 10 years. Since 2007, California has experienced 11 of the top 20 most destructive fires in its history.

California currently pays for wildfire disasters with available funds, and California Disaster Insurance will come from those same sources, according to proponents of the bill.

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Commissioner issues regulations prohibiting gender discrimination in automobile insurance rates

News: 2019 Press Release For Release: January 3, 2019

Media Calls Only: 916-492-3566 Email Inquiries: cdipress@insurance.ca.gov

Commissioner issues regulations prohibiting gender discrimination in automobile insurance rates

New rule prohibits gender rating; promotes fairness and social equity

SACRAMENTO, Calif. — California Insurance Commissioner Dave Jones has issued new regulations that prohibit the use of gender in private passenger automobile insurance rating in California. The Gender Non-Discrimination in Automobile Insurance Rating Regulation became effective on January 1, 2019.

“My priority as Insurance Commissioner is to protect all California consumers, and these regulations ensure that auto insurance rates are based on factors within a driver’s control, rather than personal characteristics over which drivers have no control,” said Insurance Commissioner Dave Jones. 

This is not the first regulatory action Commissioner Jones has taken to prevent gender-based discrimination in California’s insurance industry. In 2012, the Commissioner promulgated regulations that prohibit and prevent the denial of coverage or denial of claims for medical services based upon an insured or prospective insured’s actual or perceived gender identity. Prior to his election as Insurance Commissioner, then Assembly member Jones authored legislation (Assembly Bill 119, in 2009) to prohibit gender-based discrimination in the pricing of health insurance. Thanks to that law, California eliminated gender-based pricing in health insurance before that became the national standard under the Affordable Care Act.

The Commissioner’s Gender Non-Discrimination in Automobile Insurance Rating Regulation mandates that all automobile insurance companies operating in California file a revised class plan that eliminates the use of gender as a rating factor. 


MEDIA INQUIRIES ONLY: 916-492-3566   EMAIL INQUIRIES: cdipress@insurance.ca.gov


$10 million penalty in Wells Fargo case - Wells Fargo agrees to exit personal insurance business after investigation found it signed up 1,500 consumers for insurance without consent

SACRAMENTO, Calif. - Wells Fargo has agreed to pay a $10 million penalty as part of a settlement agreement with the California Department of Insurance. This settlement resolves the department's accusation alleging improper insurance sales practices related to Wells Fargo's online insurance referral program. The improper practices resulted in consumers being signed up and charged for insurance products without their consent.

"The Department of Insurance's investigation found that Wells Fargo was signing up and charging customers for insurance without their consent," said Insurance Commissioner Dave Jones. "Banks and other financial institutions should never be allowed to prey on their customers' trust without being held accountable."

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

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

In November 2017, the department 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 Insurance Commissioner Dave Jones, which found that from 2008 to 2016, Wells Fargo customers were issued approximately 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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FOR IMMEDIATE RELEASE: November 29, 2018
MEDIA INQUIRIES ONLY: 916-492-3566   EMAIL INQUIRIES: cdipress@insurance.ca.gov #139

Commissioner approves rate reduction to save earthquake policyholders more than $16 million

SACRAMENTO, Calif. - Insurance Commissioner Dave Jones has approved a rate reduction for California Earthquake Authority (CEA) residential earthquake policyholders that will bring millions of dollars in premium savings for tens of thousands of homeowners and renters in California.

"The department's Rate Regulation Branch staff reviewed CEA's rate filing and determined that the proposed rates should be lowered," said Insurance Commissioner Dave Jones. "Department staff worked with CEA staff to arrive at approved rates that will result in an estimated total premium savings of $16.3 million to California consumers over a three-year period. Once again, Californians have benefited from the insurance commissioner's rate regulation authority."

The initial proposal in CEA's rate filing was for a 0.4 percent increase. However, following the department's actuarial review and recommendations, CEA submitted an amended filing, requesting a rate reduction of 1.7 percent. The proposed effective date is July 1, 2019.

The rate reduction is for CEA's residential earthquake policy that can cover your home up to a certain amount, personal items in your home, such as furniture, TVs, and computers, and temporary and extra costs to live somewhere else while your area is evacuated or your home is being repaired.  

Since Commissioner Jones took office in 2011, the department has reviewed more than 54,000 rate filings and saved consumers and businesses over $3.4 billion through rate reductions. Whether a particular policyholder as a result of this rate filing approval receives a rate reduction and how much, depends on their individual policy and CEA territory.

To make a home more earthquake resistant, the department encourages California homeowners to consider retrofitting their home. A verified retrofit may also allow homeowners to receive additional discounts on their homeowners and earthquake insurance policies. The California Residential Mitigation Program (CRMP) was established in 2011 to help Californians strengthen their homes against damage from earthquakes. CRMP established Earthquake Brace + Bolt to offer up to $3,000 to help California homeowners retrofit their house to reduce potential damage from earthquakes.

Insurance commissioner calls on industry to ease inventory requirement for 2018 wildfire survivors

News: 2018 Press Release

For Release: October 4, 2018

Media Calls Only: 916-492-3566

Email Inquiries: cdipress@insurance.ca.gov

Insurance commissioner calls on industry to ease inventory requirement for  2018 wildfire survivors

In a formal notice, Jones requests insurers voluntarily provide up to 100 percent of contents coverage limits without requiring an onerous detailed home inventory

SACRAMENTO, Calif. — Due to the staggering losses suffered by thousands of residents from the 2018 wildfires, Insurance Commissioner Dave Jones is asking insurers to assist overwhelmed wildfire survivors by voluntarily easing detailed personal property home inventory requirements and following the lead of other insurers providing at least 75 percent and up to 100 percent of contents (personal property) coverage limits without the submission of a detailed inventory.
The notice issued today, acknowledges that the department is aware of and applauds the efforts of certain insurers that have already gone above and beyond the Voluntary Expedited Claims Handling Procedures and have made significant efforts to assist and accommodate survivors by offering, in some cases, up to 100 percent contents limits payment without a personal property inventory.
However, due to the massive scale of these wildfires Jones is requesting all other property insurers follow suit by providing similar accommodations and is asking insurers to notify the department by October 31, 2018 whether they will comply and what percentage they will provide. Those insurers offering an amount less than 100 percent should allow policyholders the ability to recover additional benefits, if the policyholder subsequently completes a full inventory. 
“The Carr and Mendocino Complex fires rank among the most destructive wildfires in California’s history,” said Insurance Commissioner Dave Jones. “Entire communities were decimated with residents suffering staggering losses of not only property, but tragically loss of life and injuries. I’m asking property insurers to ease the burden on traumatized survivors by voluntarily providing at least 75 percent of contents coverage without the onerous requirement of a detailed home inventory, so survivors may get on with patching their lives back together.”

The commissioner’s request applies to all insured homes that suffered a total loss, unless the insurer has reason to believe the home was not furnished. The department advises policyholders already working with a claims adjuster to develop a settlement plan that best serves their needs, which may include taking the time to complete a personal property home inventory.

 The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833

California Insurance Commissioner OKs Workers’ Comp Rating Bureau Filing

October 15, 2018

  • California Insurance Commissioner Dave Jones has approved a filing from the Workers’ Compensation Insurance Rating Bureau’s that makes amendments to uniform statistical reporting and experience rating.

The WCIRB submitted a regulatory filing and ensuing amendments to the filing in Aug. 1 which was followed by a public hearing was held on Aug. 3.

Jones’ decision Oct. 12 decision includes:

  • Proposed amendments to Classifications 8868 and 9101 and the proposed establishment of Classifications 8869, 8871, 8872, 8873, 8874, 8876 and 9102 were not approved.

  • All other proposed amendments to the California Workers’ Compensation Uniform Statistical Reporting Plan—1995, Miscellaneous Regulations for the Recording and Reporting of Data—1995, and California Workers’ Compensation Experience Rating Plan—1995 effective Jan. 1, 2019 were approved as filed.

  • The proposed amendments to the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 effective January 1, 2020 were approved as filed.

  • The WCIRB’s proposed Jan. 1, 2019 expected loss rates by classification were approved with the exception of the proposed expected loss rates for Classifications 8868, 8869, 8871, 8872, 8873, 8874, 8876, 9101 and 9102. The Expected Loss Rates for Classifications 8868 and 9101 will be modified in accordance with the commissioner’s decision.

  • The Jan. 1, 2019 eligibility threshold based on the approved January 1, 2019 expected loss rates is $10,000.

The WCIRB is in the process of updating the Uniform Statistical Reporting Plan, Miscellaneous Regulations and Experience Rating Plan to reflect the regulatory changes approved by the commissioner.

The WCIRB is expected to begin calculating 2019 experience modifications within the next several days.

The commissioner’s October 12, 2018 decision pertains only to the WCIRB’s 2019 Regulatory Filing and does not address the proposed changes to the 2019 advisory pure premium rates.


California’s Data Privacy Law a Concern, Opportunity for Insurance Industry

California is on track to have what will be the nation’s most far-reaching law to give consumers more control over their personal data. The new law may be both a big concern, as well as a new and important opportunity, for the insurance industry.

Assembly Bill 375, authored by Assemblyman Ed Chau, D-Arcadia, was signed by Gov. Jerry Brown last week, hours after lawmakers passed it with no dissenting votes in a last-minute effort to convince a San Francisco real estate developer to remove a similar initiative from consideration for the November ballot ahead of a deadline. Many saw AB 375, the California Consumer Privacy Act of 2018, as being more favorable than a voter-enacted initiative, which is more difficult to alter than laws passed through the legislative process.

The developer withdrew the initiative shortly after the law was signed. The new law follows massive data breaches in recent years at companies like Target and Equifax, while Facebook also has faced scrutiny amid revelations that consulting firm Cambridge Analytica collected data from millions of Facebook users without their knowledge.

The law requires companies to report to customers upon their request what personal data they’ve collected, why it was collected and what third-parties have received it. The law doesn’t take effect until Jan. 1, 2020, but it’s already gotten the attention of people who are warning of potential liabilities for companies that don’t take the time to understand the law, or decide not to obey it. This law is similar to Europe’s General Data Protection Regulation. GDPR data privacy regulations took effect in May. Those regulations also aim to give consumers greater control over use of their data.

GDPR overhauls data protection laws in the European Union, and foresees fines of up to 4 percent of global revenues for companies that break the rules. GDPR forces companies to implement data storage, processing and marketing best practices, and enables consumers to request to be forgotten – meaning companies must remove all their data.

“The California privacy bill is a natural progression of GDPR,” said Jeff Brown, vice president of Imprezzio, a technology software company that serves the insurance industry. “We believe this measure was accelerated by (Facebook founder and CEO Mark) Zuckerberg’s Congressional testimony on the use of consumers data and the strong desire by consumers to understand and control their data – it is a social rights issue.”

Joan D’Ambrosio, a partner in San Francisco-based law firm Clyde & Co., who focuses on technology, media and privacy for insurers, is urging the insurance sector to watch this new law closely. From an insurance perspective it certainly creates the potential for more liability for companies and therefore for their insurers,” D’Ambrosio said. “There’s no question it will create potential liability.”

The new California law provides for its enforcement by the state attorney general, and provides a private right of action “in connection with certain unauthorized access and exfiltration, theft, or disclosure of a consumer’s nonencrypted or nonredacted personal information.” It also creates a Consumer Privacy Fund with in the state’s General Fund to be used to support the purposes of the bill and its enforcement.

Companies that violate the law could not only face penalties, but lawsuits as well, D’Ambrosio said. “The potential exposure would be down the line if companies deviate from the requirements,” she added. The new law lays out numerous consumer rights, including that consumers will have the right to request that a business that collects personal information about them must disclose to the consumer the following:

  • The categories of personal information it has collected about that consumer.

  • The categories of sources from which the personal information is collected.

  • The business or commercial purpose for collecting or selling personal information.

  • The categories of third parties with whom the business shares personal information.

  • The specific pieces of personal information it has collected about that consumer.

The law also requires a business that collects personal information about consumers to disclose the categories of personal information it has collected about them, the categories of sources from which the personal information is collected, the purpose for collecting or selling personal information, the categories of third parties with which the business shares personal information and the specific pieces of personal information the business has collected about that consumer.

D’Ambrosio believes the law will undergo further modifications as the state works out how to enact and enforce it. “A lot of the details now are to be fleshed out,” she said. “But there is going to be a much higher level of accountability about the collection and usage of the information.”

The law also creates an opportunity for the insurance industry to sell more cyber policies, said Joshua Motta, CEO of Coalition, who was quick to point out that there are key differences between the new California law and GDPR. “Under GDPR fines and penalties are not insurable,” he said, noting that in most EU states, only defense costs are insurable under the regulation. “With California, all of the fines and penalties are insurable.” He added, “It’s a significant tailwind to purchase the insurance.”

San Francisco, Calif.-based Coalition was co-founded by Motta and fellow technology entrepreneur John Hering. Licensed as an insurance producer, the managing general agent offers customers free cybersecurity tools, and business customers can acquire up to $10 million of insurance coverage. Motta said the firm fielded numerous calls from brokers after GDPR went into effect, and he expects more of the same following the new California law.

The law calls for fines of up to $7,500 per record loss, which will serve as a loud wakeup call for businesses without cyber liability coverage. “Companies aggregating data, they now have just a massive, massive loss exposure if that data is breached,” Motta said. “That is an unforeseen business expense that can be catastrophic, it can be company ending. It’s getting to the point where businesses cannot afford to be uninsured.”

The law covers a broad array of companies. It includes any for-profit company doing business in California that has revenues greater than $25 million, that receives more than 50,000 unique personal records per year or that derives more than 50 percent of its annual revenue from selling personal information. Motta noted that something as simple as the IP addresses of a website’s visitors from California may be considered personal information.

“If you have 50,000 or more IP addresses, then you are subject this new law,” he said. “This has a very wide-ranging impact on businesses across the country.” Brown is advising companies that collect data in California or in Europe to consider creating a new position, which he calls a data protection officer, to help companies deal with the new law.

“Make sure this person has the expertise you need,” Brown advised. “They can help you redesign what consent and disclosure looks like for your customers. Consumers will need to check a box (or its equivalent) for every single use-case you have for their data. They need to be able to select those they agree with and decline those they don’t, and you need to be able to comply and track their preferences in your systems. He also advises that companies consider what third-party providers are doing as well.

“Remember, if a third-party is not able to prove their GDPR compliance, the work they do for your EU data is illegal,” he said. “Audit your third-party providers and re-evaluate service level agreements.” California’s position as the nation’s most populous state already makes the new law of nationwide interest, however D’Ambrosio expects other states to follow California’s lead with data privacy. “There are a lot of people who are drawing analogies with GDPR with this particular act that it’s likely to cause a cascade of legislation around the country trying to meet privacy standards,” she said. “It’s very likely that these standards will continue to change.”

By Don Jergler | July 3, 2018 -Insurance Journal