Insurance Cancellation Ban Passes Assembly Panel on Party-Line Vote

Democrats on the Assembly Finance and Insurance Committee brushed aside Republican opposition Tuesday and approved a heavily lobbied bill that would prohibit blanket cancellations of insurance policies.

The measure, by Sen. Alan Robbins (D-Tarzana), was drafted in the wake of voter approval of Proposition 103 after insurance companies threatened not to renew automobile insurance policies because of pro-consumer features of the ballot initiative.

The measure already has passed the Senate. The committee hearing Tuesday represented its first hurdle in the Assembly.

Injecting partisanship into the issue, the committee approved the measure 12 to 4 on a straight party-line vote. All four negative votes were cast by Republicans, and two other Republicans left the hearing room rather than vote.

The bill will require a two-thirds vote on the Assembly floor, so it eventually will need some Republican support to survive.

Already on the Assembly floor is a post-Proposition 103 bill by Assemblyman Patrick Johnston (D-Stockton) that would prohibit insurance companies from charging higher rates than they did before last year’s election. It would also require insurance companies that canceled policies to renew or reinstate them at pre-election rates.

Robbins’ bill would impose stiff fines on insurers that cancel or refuse to renew more than 5% of their auto insurance policies. The fines’ amounts would be determined by a formula linked to the percentage of canceled policies and could be as much as 50% of what the company collected the previous year in private car insurance premiums if, for example, the company canceled all its policies.

The Democratic senator believes that his bill ultimately will become the “test case” that will determine whether the Legislature is going to move against insurance companies that have raised rates and taken other actions contrary to provisions of Proposition 103.

Robbins argued that his bill is the best test of where lawmakers stand because it is a fairly straightforward measure that would hurt only insurance companies that break the law.

“Insurance companies that have followed the law are not adversely affected by this bill and will never have to pay a penny,” said Robbins, whose bill was approved by the full Senate by the narrowest of margins and only because he was able to get three Republican votes.

“If we don’t get this bill passed, it’s clear there aren’t going to be any bills passed this year that insurance companies don’t like,” he said.

During the hearing, opponents called penalties contained in the bill too harsh and questioned the legality of many of the bill’s provisions. Insurance industry lobbyists pleaded with the committee to delay action until the California Supreme Court rules on the legality of Proposition 103.

Among the lobbyists testifying against the bill was Alister McAlister, a former Democratic assemblyman who served for many years as chairman of the Assembly insurance committee.

“We think that the penalties are Draconian,” said McAlister, who now is paid to represent the California Chamber of Commerce and its insurance industry interests. “If you look at the precedents in criminal law, it is very doubtful that judges would impose these kinds of penalties.”

The next stop for the bill is the Assembly Ways and Means Committee. Because that committee also is controlled by Democrats, Robbins said he does not anticipate a problem until the measure reaches the Assembly floor.

Robbins said he thinks Republicans in the Assembly will eventually agree to support his bill in large enough numbers to get it out of the lower house.

“I don’t think there is a great deal of support out there by the general public for the idea of, ‘Oh, my God, we’re being so harsh and Draconian with the insurance companies,’ ” Robbins said.

Republican Assemblyman Pat Nolan of Glendale criticized Robbins for refusing to acknowledge legal questions about the bill. “(Robbins) has just muscled it out everywhere along the way without really dealing with our concerns,” Nolan said.