Consumer Groups, Quake Survivors Call on Legislators to Enact California Insurance Policyholder Bill of Rights

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Senator Escutia Agrees to Author Legislation

Sacramento–Representatives of California’s leading consumer protection organizations and a representative of the Northridge earthquake victims’ association, CARe, challenged legislators to enact a series of powerful policyholder protections that will prevent the abuses of the Quackenbush era from recurring. In a sweeping “California Insurance Policyholder Bill of Rights,” unveiled in Sacramento today, the groups propose such reforms as:

  • making Department of Insurance examinations of insurance companies public,

  • providing policyholders with an extended period of time to file an insurance claim,

  • expanding the legal protections for consumers mistreated by their insurer

  • establishing a voluntary membership organization to protect and defend the common interests of policyholders

  • banning insurance industry contributions to the Insurance Commissioner.

The consumer organizations signing the Policyholder Bill of Rights include: The Foundation for Taxpayer and Consumer Rights, Consumers Union, Community Assisting Recovery (CARe), Consumer Federation of California, California Public Interest Research Group (CalPIRG), Consumer Action, Center for Public Interest Law, Neighbor to Neighbor, United Policyholders, Congress of California Seniors and California Reinvestment Committee.

“The consumers hurt by the Northridge insurance scandal must not be forgotten in the aftermath of Quackenbush‘s resignation,” said consumer advocate Douglas Heller of the Foundation for Taxpayer and Consumer Rights. “The downfall of one administration does not solve the problems of millions of consumers. Without new safeguards, policyholders will be forced to endure the same indignities at the hands of insurers time and again.”

Senator Escutia agrees to introduce legislation based on the principles of the Policyholder Bill of Rights

“As Legislators we have a responsibility to complete the work we began with the investigations held earlier this year,” said Senator Escutia. “My committee hearings on insurance company bad faith identified many of the problems addressed in this proposal. If we are committed to protecting the consumers of California, we must take this bull by the horns and reform the insurance industry.”

Consumer Groups demand rights in wake of revelations about insurer behavior after the Northridge earthquake

“We represent the consumers and policyholders of California and are gathering together to demand our rights,” said Sara Nichols of Neighbor to Neighbor. “Our premium dollars are at stake here and this document sets forth what we expect to get for our money.”

Recent investigations of the California Department of Insurance (CDI) have revealed extraordinary misconduct by the former Commissioner Chuck Quackenbush. Additionally, Legislative hearings and documents produced by a CDI whistleblower provide detailed information indicating that insurance companies mistreated policyholders after the Northridge earthquake. The companies’ behavior was ignored by Quackenbush in exchange for contributions to private foundations.

“After surviving the Northridge quake, my family’s nightmare was extended twice as we became victims of our insurance company’s greed and our Insurance Commissioner who sold us out for contributions to his private foundations,” said Sara Bacon, a Northridge earthquake survivor and member of the quake victim support group Community Assisting Recovery (CARe). “Future victims need a Policyholder Bill of Rights to protect them from the insurance company abuses that have left so many of my neighbors still fighting to get a fair settlement six years after Northridge.”

The proclamation developed by the coalition of California consumer groups contains specific proposals under the following five principles:

I. Policyholders have a right to timely and accurate information

II. Policyholders have a right to a fair insurance settlement

III. Californians have a right to information about insurance company conduct

IV. Californians have a right to hold the Insurance Commissioner accountable

V. Policyholders have right to pursue all legal remedies against an unfair insurer in a court of law

California Insurance Policyholder Bill of Rights

Whereas, California policyholders, who pay $65 billion in insurance premiums each year, have the right to obtain all benefits they were promised and for which they have paid, and to be treated fairly by their insurance company; and,

Whereas, policyholders and virtually every consumer in California, both businesses and individuals, entrust their lives, homes and assets to insurance companies; and,

Whereas, the staff of the Department of Insurance has determined that the state’s largest insurance companies systematically violated the minimum standards mandated for the settlement of insurance claims after the Northridge earthquake and in other circumstances; and,

Whereas, former Insurance Commissioner Quackenbush failed to enforce the laws against insurance companies and undermined his Department’s ability to monitor, sanction and correct insurers’ claims handling practices; and,

Whereas, insurance companies regulated by the Insurance Department gave Mr. Quackenbush over $8 million in campaign contributions, thereby deeply undermining public confidence in the fairness and integrity of the office of Commissioner and the Department; and,

Whereas the actions of Mr. Quackenbush had the effect of concealing from policyholders, the public and the courts rampant violations of the law engaged in by some of the largest insurers in California, to the detriment of policyholders and the public, which also had the effect of obstructing justice; and,

Whereas, claims disputes generated by the improper conduct of insurers force policyholders to seek legal redress, which imposes a significant cost upon policyholders and all taxpayers;

We, the People of California, therefore find that the public requires greater protections, including stronger government oversight and improved access to legal redress and resolutions, in order to guarantee that insurance companies respect their contractual and statutory obligations to their policyholders and other claimants and adhere to certain minimum standards of conduct in the processing and settlement of all insurance claims, as follows:

I. Policyholders have a right to timely and accurate information

1. Insurance companies shall notify policyholders in plain English and clearly legible, 12 point font when their premiums, amount of coverage or other policy benefits change;

2. When a claim is filed, the insurers must provide the policyholder with a copy of the state law that lists insurers’ obligations for fairly settling claims

3. Insurers will document all claim-related communications in writing;

4. An insurer shall provide any claimant with a detailed written statement of the findings of the claim investigation within ten days of the completion of the investigation of the claim;

5. Policyholders will be provided with a written explanation for any denial of benefits within ten days of the denial.

II. Policyholders have a right to a fair insurance settlement

6. The period during which a policyholder may file a claim with an insurance company arising out of a natural disaster shall extend to 90 days after the actual physical damage has been detected by the policyholder, regardless of whether claims for previously-discovered damage from the same event have been paid. Any provision of an insurance policy purporting to decrease this limitation period shall be void and unenforceable.

7. To prevent insurers from forcing policyholders to accept unreasonable settlements when there is a dispute over coverage, all homeowner and earthquake policies shall provide reasonable coverage for alternative living arrangements;

8. Notwithstanding any other policy provision, all guaranteed replacement coverage policies shall pay costs of building code upgrades.

9. Insurance adjusters will be trained to adjust claims and registered with the Department of Insurance;

10. Homeowners shall not be required to participate in the costly and time-consuming appraisal process to resolve a claim;

11. An insurer must inform a policyholder of their right to consult legal counsel prior to requiring the policyholder to submit to an examination under oath;

12. Policyholders may file suit against an insurer for unfair claims practices up to two years after the denial or inadequate settlement of a claim, regardless of any other statute of limitation or “suit against us” provision;

13. Northridge earthquake claimants may file suit against their insurer for unfair claims practices through January 1, 2002, regardless of any policy provisions limiting such suits to one year after the Northridge earthquake.

III. Californians have a right to information about insurance company conduct

14. The California Department of Insurance (CDI) shall publish and regularly update on its website a list of names of all state admitted carriers and all market conduct examinations being conducted;

15. CDI shall publish and regularly update on its website a list of all market conduct examination settlements and stipulations and other enforcement actions taken against each licensed insurer or other carrier operating in California for the past ten years;

16. All preliminary and final market conduct examinations reports shall be available to the public, and the executive summary of each market conduct examination shall be published on the CDI website;

17. CDI shall make publicly available data concerning the number of homeowner policies sold in underserved communities, including FAIR plan policies;

18. California courts shall report to CDI the verdict, settlement or any judgement in any action against an insurer in connection with claims handling violations within thirty days of the verdict, settlement or entry of judgement;

19. The court shall report to the State Bar any lawyer, representing an insurance company, who utilizes judicial resources improperly in order to delay the resolution of a claim dispute;

20. All settlements of lawsuits alleging unfair claims practices shall be made publicly available upon a written request to the court. Secrecy provisions or confidentiality agreements shall be void and shall be given no effect.

IV. Californians have a right to hold the Insurance Commissioner accountable

21. Neither the Insurance Commissioner nor candidates for the post may accept any campaign contributions from insurance companies or other entities with business before the CDI;

22. Employees of CDI shall not work for an entity regulated by CDI for a period of three years after the termination of their employment;

23. Consumers of California shall have the right to form an Insurance Policyholders Association, about which they will be informed through insurance company and DMV mailings, that will not be controlled by any insurer and will protect and defend the common consumer interests of policyholders before the CDI, the Legislature and the courts.

V. Policyholders have right to pursue all legal remedies against an unfair insurer in a court of law

24. No agreement to arbitrate an insurance claim shall abridge a policyholder’s right to seek legal remedies against an insurer and any pre-existing agreements to that effect are void;

25. Policyholders and other persons with claims against an insurance company may file suit against an insurer for unfair claims handling practices;

26. Upon any jury verdict awarding punitive damages, a prevailing consumer plaintiff may inform the court on the record of any designation of a non-profit, public interest organization for receipt of any portion of the punitive damage award. Such designation shall be considered by the court when ruling on any motion to reduce the punitive damage award.

27. In a lawsuit in which the insurer is found liable for bad faith, the insurer must pay the State General Fund an amount equal to the estimated cost of the trial to the taxpayers.


Foundation for Taxpayer and Consumer Rights

Consumers Union

Community Assisting Recovery

Consumer Federation of California

California Public Interest Research Group (CalPIRG)

Consumer Action

Center for Public Interest Law

Neighbor to Neighbor

United Policyholders

Congress of California Seniors

California Reinvestment Committee

Consumer Watchdog
Consumer Watchdog
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