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Today, Consumer Watchdog will be in Sacramento to stop Mercury Insurance's latest assault on insurance reform Proposition 103 -- legislation that precludes California's insurance commissioner and judges from ordering insurers to issue refunds if rate increase requests filed with the Department of Insurance later prove to be unfair or excessive.  AB 1054 (Joe Coto) is both a gift to insurers and an illegal amendment to Prop 103.  Executive Director Doug Heller will be working to stop the legislation in the Assembly Judiciary Committee this morning.  (Follow his tweets at https://twitter.com/DougHeller or on our Facebook fan page feed )

This afternoon Judy Dugan will team up, in the Assembly Health Committee, with HMO patients who have nightmare stories to tell. They will be fighting for HMO premium regulation, based on Prop 103's property casualty model, authored by Assembly member Dave Jones and for protections against unlawful cancellation of health insurance policies, so-called recissions, by Assembly member Hector De La Torre.  Both legislators happen to be vying to be the next California Insurance Commissioner. The Jones legislation is expected to clear his own Assembly Health Committee.  De La Torre's has a fighting chance as well -- an earlier version was vetoed by Governor Schwarzenegger last year.

Stay tuned for the developments out of Sacramento.  Here's a preview of the big Mercury Insurance fight  over AB 1054 from the Assembly Judiciary Comittee's analysis:

KEY ISSUES:

1)    AS A THRESHOLD QUESTION, DOES THIS BILL FURTHER THE PURPOSES OF PROPOSITION 103 -- A REQUIREMENT OF ANY LEGISLATIVE AMENDMENT TO THAT INITIATIVE?

2)    IF THE INSURANCE COMMISSIONER MISTAKENLY OR INAPPROPRIATELY APPROVES INSURANCE RATES THAT ARE EXCESSIVE TO CONSUMERS, SHOULD THE INSURANCE COMMISSIONER OR A COURT BE PREVENTED – AS THIS BILL ARGUABLY MAY DO -- FROM CORRECTING THIS POTENTIAL INJUSTICE BY ORDERING INSURANCE COMPANIES THAT INAPPROPRIATELY PROFITED FROM THOSE EXCESSIVE RATES TO REFUND THOSE IMPROPER PROFITS TO CONSUMERS?

3)    IN THIS INSTANCE INVOLVING IMPORTANT CONSUMER RIGHTS, SHOULD THIS LEGISLATION BE PERMITTED TO POTENTIALLY INTRUDE UPON ONGOING LITIGATION THAT SEEKS TO PROTECT CONSUMERS FROM ALLEGED IMPROPER RATES?

SYNOPSIS

This bill was very recently passed by the Insurance Committee on a 9-1 vote, and is now before this Committee because it may potentially affect the remedies available to consumers in insurance rate cases.  Specifically, one provision of the bill expressly appears to seek to significantly limit a remedy provided to the courts in Proposition 103.  Opponents of the measure contend that this provision in the bill would prevent either the Insurance Commissioner (IC) or a court from ordering refunds when rates charged by insurance companies and approved by the IC turn out, nonetheless, to be unfair and excessive.  This area of the law has been the subject of substantial litigation, and this bill would appear to codify one court case that has considered the issue, while calling into question other cases, including ongoing cases.  Additionally, a legislative amendment to Proposition 103 can only be upheld as constitutional if it furthers the purposes of that initiative, and it is not at all clear that this bill furthers the purposes of Proposition 103.  This bill appears to be very similar to AB 1051 (Calderon, 2008), which was never considered in this form by the Assembly, and which failed passage in the Senate Banking, Finance and Insurance Committee last year. 

This bill is supported by the Mercury Insurance Company who argues that it is unfair to penalize an insurer that is in compliance with rates approved by the IC.  The bill is opposed by Consumer Watchdog and Consumer Attorneys of California who argue that by seeking to prevent potential refunds in this area, the bill limits the ability of consumers who have been overcharged by insurance companies from recovering the overcharge and, thus, increases the incentive for insurance companies to submit excessive, unfair or otherwise illegal rates in their rate applications in the hope the IC will fail to discover it.

Should the Mercury legislation pass, there's a good court case in challenging it.  But that would waste taxpayer resources and tie up Consumer Watchdog's attorneys for years to come.  We're hoping Doug will be successful today.