Calif. Commissioner, Trade Associations Battle Over Homeowners Regs

California Insurance Commiss-ioner John Garamendi reiterated that homeowners are in crisis during a press conference in San Diego Aug. 21, announcing new additions to his “Homeowners Bill of Rights.”

Garamendi addressed his concerns with the use of the Comprehensive Loss Underwriting Exchange (CLUE) database, stating that the database is inaccurate and unfair to consumers. Several local area homeowners shared their own difficulties in obtaining coverage after their name appeared in the CLUE database, reportedly for something as simple as a telephone inquiry about their coverage.

Among Garamendi’s orders include the requirement that any information entered into the CLUE database be accurate, and that it be illegal for insurance companies to enter simple inquiries into the database.

The California Department of Insurance (CDI) enacted emergency regulations on July 23, restricting insurers from considering past losses when underwriting homeowners policies. However, on Aug. 26, a Sacramento Superior Court ruled in favor of three trade association —the American Insurance Association, Association of California Insurance Companies, and the Personal Insurance Federation of California—in response to their lawsuit against the Commissioner and the CDI for enacting the emergency regulations.

The Petition for Writ of Mandate, filed on behalf of the trade associations by Livingston and Mattesich Law Corporation, argued that the emergency regulations mandated new requirements on insurers, which could potentially further drive up the cost and reduce the availability of homeowners insurance in California.

In a press release, Gene Livingston, partner with Livingston and Mattesich, said, “The associations asked the court to invalidate the Emergency Regulation because the Commissioner lacks legal authority to restrict insurers’ choices about what risk to insure. The court agreed and granted the relief requested in the petition.”

Representatives of the three associations responded to the ruling, stating: “Today’s ruling shows a recurring pattern by the Insurance Commissioner to promulgate excessive and unauthorized regulations. The Department of Insurance Emergency Regulations cost insurers and their customers a significant amount of money and continue to create confusion and uncertainty in the marketplace.”

Garamendi responded in a press release, stating, “The emergency regulations the judge overruled today were specifically designed to prevent the industry from arbitrarily canceling and non-renewing insurance policies. The regulations would have required insurers to verify the information they get from databases is accurate, and that it has some connection to the risk of future claims.

“Well, no surprise, the insurers want to block me from doing what the voters of California elected me to do. I am going to appeal this decision to a higher court, and I will call for legislation to enact laws that provide consumers with these much needed protections,” he added.

Garamendi accused insurance companies of “blacklisting” consumers and said insurers are “refusing to look at future risks,” instead, underwriting based on the property’s past history.