Insurer Groups File Another Lawsuit Against SB 1899

Another lawsuit was filed yesterday in Los Angeles County Superior Court against SB 1899. Authored by Senate President Pro Tem John Burton (D-San Francisco), and signed into law by Governor Davis, SB 1899 allows certain Northridge quake victims to take an unfair insurer to court if they were previously denied that right due to a statue of limitations.

This action follows a suit filed on Nov. 22 in the California Supreme Court by Century National Insurance Co. and three of the big industry associations–the Association of California Insurance Companies , the Personal Insurance Federation of California and the National Association of Independent Insurers–to rule on the constitutionality of SB 1899. The groups believe that SB 1899 (also known as the Burton bill) would pave the way for class-action lawsuits that could result in huge awards from insurers. The high court denied the petition to hear the case, but did not deny the case on its merits.

The law provides policyholders who were denied the right to sue their insurer because of a one-year statute of limitations, access to the courts to seek remedy against the unfair and illegal behavior of their insurance carrier. It reopens and extends the statute of limitations for filing suit against an insurer that has unnecessarily denied or undervalued a legitimate earthquake-related claim for one year.

On behalf of the petitioners in the lawsuit, Sam Sorich, vice president and western regional manager of the NAII, issued a statement on Nov. 22, the day the action was filed.

“The implications of SB 1899 are far reaching,” Sorich said. “Without immediate Supreme Court review, a tidal wave of litigation will surely engulf the Los Angeles trial courts and all divisions of the Second Appellate District in Los Angeles, creating a potential for contradictory decisions on the various constitutional issues and a cloud over all contractual relationships in California. “The stability of contractual obligation is a cornerstone of business and personal relations in the modern world. We rely on contractual promises in every aspect of our lives-from buying consumer goods, to earning a living, to insuring our homes. And we rightly respect that state government will not-indeed cannot-alter the contracts we have made with each other. Our constitution says so.”

Barry Carmody, ACIC president, voiced his concern about the bill’s effect on the integrity of the judicial system by setting a dangerous precedent retroactively extending the filing period for Northridge earthquake claims that was previously limited under both California law and the policies between insurers and their customers. “If a statute of limitations can be changed retroactively for filing these earthquake claims, it can be changed retroactively for any type of claim,” Carmody said. “Businesses ultimately could be affected and the uncertainty created by retroactive changes in the law will be factored into the price all consumers pay for all goods and services.”

By attempting to change the provisions of the contracts, Sorich added, SB 1899 “poses a threat to the stability of every commercial enterprise in California because commerce cannot thrive without full assurance that a contract means what it says.”

Current law requires claims to be filed within a year after the quake, and insurers say that one-year filing period is a standard deadline in their contracts. The handling of the claims captured attention during legislative hearings into Quackenbush’s conduct in office. The new law opens a one-year window-from Jan. 1, 2001, to Jan. 1, 2002-in which Northridge victims can reopen damage claims. It was six years ago (Jan. 14, 1994) that the quake rumbled through the Los Angeles area six years ago, killing dozens of people and causing roughly $15.3 billion in uninsured losses.

As it now stands, the law applies to those who had made claims before Jan. 1, 2000, and who have not reached a court resolution or a written settlement on the claims in which the insureds had legal representation. Consumer advocates have accused insurers of dragging their feet on these claims, leaving homes, condominiums and apartment buildings in disrepair. They argue that thousands of Californians who lived through the Northridge quake have yet to receive full and fair compensation from their insurance company to cover the costs incurred as a result of the quake.

According to PIFC President Dan Dunmoyer, the insurance industry settled 99.75 percent of all 600,000+ Northridge claims. So that’s 600,000+ claims that could be re-opened-and could invite the filing of stale and fraudulent claims. PIFC feels that SB 1899 is “nothing but a ploy by plaintiff’s lawyers who stand to make hundreds of millions of dollars on the backs of satisfied customers who have received payment for their Northridge losses.”

Topics Lawsuits California Carriers Claims