Insurers’ fire policies criticized;

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PROPOSAL: Coverage cuts in response to claims spur drive for legislation.

Press Enterprise (Riverside, CA)

Victims of last year’s Southern California wildfires are being victimized again – this time by insurance companies, Insurance Commissioner John Garamendi charged Tuesday.

Pushing legislation opposed by the insurance industry, Garamendi called on lawmakers to prevent carriers from dropping policies or instituting new surcharges for customers who file claims stemming from wildfires or other natural disasters – a practice the commissioner called “use it and lose it.”

“You buy insurance to take care of the circumstances where you have… a fire, where you file a claim. And then when you do that you lose your policy? You have to pay more? This is wrong,”
Garamendi said.

But insurance officials said the change would drive providers from the California market and increase premiums as companies cover the higher costs of high-loss customers.

“When there’s a real loss, people should file a claim,” said Sam Sorich, president of the Association of California Insurance Companies. “But at the same time, we as insurance companies should be able to take into account whether or not a person has filed a claim.”

Today, the Assembly Insurance Committee is scheduled to consider the bill, SB 1474, by state Sen. Martha Escutia, D-Norwalk.

The measure is the most controversial of several pieces of fire-related insurance legislation moving through the Capitol.

One bill would extend the time a policy-holder has to rebuild, while another would make insurance companies  do a better job disclosing the cost of rebuilding an insured property.


Although Democrats pushed SB 1474 through the Senate, the Assembly Insurance Committee includes several members of the so-called moderate caucus – Democrats who sometimes block
legislation opposed by business. Insurance companies have contributed tens of thousands of dollars to committee members.

Assemblyman John J. Benoit, R-Palm Desert, the panel’s vice chairman, said he plans to oppose the measure. Insurance companies have a right to be leery of customers living in areas
prone to fires and other disasters.

“Some of the reasons they’re not writing it (policies) is because the meddling of the Legislature in California has made the selling of insurance an extremely difficult task,” Benoit said.

Assemblyman Russ Bogh, R-Cherry Valley, represents an area heavily damaged by last year’s fires. He said he might support the bill if it was limited to claims stemming from fires and
natural disasters.

“I’m real close to supporting the bill if we get some amendments in it,” Bogh said.

October’s blazes killed 24people and destroyed more than 3,500 houses and other structures in Riverside, San Bernardino, San Diego, Los Angeles and Ventura counties. In the months since, 15,000 insurance claims have been filed, totaling about $ 2.1 billion dollars.


Several fire victims who spoke at Garamendi’s news conference Tuesday said that fleeing their homes last fall was just the beginning of their troubles.

Lisza Pontes and her family escaped the Cedar Fire in San Diego County as flames swept through their mountain neighborhood early in the morning. Twelve of her neighbors died.

Pontes filed a $ 50,000 damage claim for her home, one of the few in the area left standing. But then months went by with no policy renewal notice.

Finally, she learned her family’s policy would not be renewed.

“I figure, hey, I’m a go-getter, I know how to solve this. I’ll find different insurance,” Pontes said. “Seventeen denials later, I’m now looking for some help here with this bill.”


Under current law, insurance companies can review the claims history of someone applying for a policy or of a customer due for a policy renewal.

Insurance officials such as Sorich said the review is typical.

Under SB 1474, however, insurance companies would be prohibited from considering claims arising from natural disasters and fires that were not the policy-holder’s fault. Also off-limits would be claims that were filed but found to be outside the policy and never paid.

And if customers fix problems that triggered a claim – such as clearing  brush from a house damaged by fire – insurance companies would be prohibited from holding that against them.

“Insurance companies are punishing consumers if they have the gall to use their policy,” said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights.

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