Brown Shelves Bill Aimed at Easing Insurance Crisis

After vowing last month to push legislation that would make the insurance industry “stand up and take notice,” Assembly Speaker Willie Brown on Tuesday quietly shelved the centerpiece of his program aimed at curbing the insurance crisis in California.

The San Francisco Democrat said his legislation, which would have required California insurers to cover high-risk businesses and government agencies, needs more work. Rather than call for a vote, he asked the Assembly Finance and Insurance Committee to study his bill after the Legislature adjourns Aug. 29.

Legislative committees often use so-called “between-sessions studies” to bury unpopular bills in a way that is less embarrassing to their authors than outright rejection.

But Brown insisted that his bill is not dead. “I’ll get the votes,” he told reporters, adding that the only reason he asked for the study in the fall was to get answers to questions raised by committee members.

“In view of the fact that I can’t answer those questions, I can’t ask a member of the committee to cast a vote,” Brown said.

At the start of the current session last winter, Brown pledged to work hard to find a legislative remedy for the looming California insurance crisis, which has made it difficult or impossible for many businesses and government agencies to obtain liability coverage.

After returning last month from an insurance industry-sponsored visit to Lloyd’s of London--the huge reinsurance syndicate that stands behind most American insurers--Brown pledged to introduce “some fairly tough legislation” that would prompt insurance companies to “stand up and take notice.”

Last week, Brown persuaded the Finance and Insurance Committee to approve several bills in his package of legislation, including one that would force insurers to cut their premiums if voters pass Proposition 51. If passed, the initiative would place limits on the amount paid by defendants in some categories of personal injury lawsuits.

It was clear even then, however, that there was little enthusiasm within the Democratic-dominated committee for the Speaker’s major bill--the one that would have required insurance companies to cover cities and all other “bad risks.”

His decision Tuesday to shelve the legislation came as criticism mounted ever higher over the state’s role in the regulation of the insurance industry.

Assemblywoman Maxine Waters (D-Los Angeles), who chairs a key Assembly budget-writing committee, recommended later in the day that the Assembly eliminate the budget of the state insurance commissioner’s office and use the $1 million that would be saved to set up a new consumer services bureau.

Charging that the Department of Insurance is being run by the insurance industry, Waters said she was making the recommendation “because I do not think the citizens of the state of California deserve what they are getting from the Insurance Department.”

Insurance Comissioner Bruce Bunner, an appointee of Gov. George Deukmejian whose salary and that of six other employees would be eliminated by the recommendation, said he expects the full Assembly to follow Waters’ lead. But he said it is uncertain whether the Senate, which already has reviewed the department’s budget, will go along.

“Her focus is very clearly coming from the consumer side and I understand that,” Bunner said. “But I think the department has made some very good strides in that regard.”

A few hours earlier, Consumers Union released a report highly critical of the department, charging that it had failed to adequately police the industry and thereby gave “insurance companies a green light to engage in deceptive practices, terminate policies and impose extortionate increases without good cause.”

Agency Accused

The 47-page report entitled “Sorry We Could Not Be of More Help” accused the department of maintaining close ties with insurers and of promoting a revolving-door policy in which key officials and state insurance commissioners end up working for the companies they once were charged with regulating.

Release of that report followed by one day another critical assessment of the department issued by state Auditor General Thomas W. Hayes, who charged that the department was slow to process more than 50% of the consumer complaints it received in 1984-85.

Insurance Commissioner Bunner countered that his staff has been overwhelmed and unable to respond to complaints about pricing and unavailability of coverage.

Under questioning Tuesday by Waters’ Assembly budget subcommittee, Bunner agreed to make public the names of insurance companies that were forced to roll back their premiums after being caught overcharging customers. The department had maintained that the information was confidential under state law.

The insurance industry has joined with local governments and business organizations in urging passage of Proposition 51 on June 3.

Brown, a trial lawyer who opposes any such revision of the liability system, instead has been trying to focus attention on the insurance industry, charging that the crisis is the result of its own mismanagement and thirst for profits.