Quake Insurance Bill Hits Another Snag

A proposed compromise bill to create a state earthquake insurance agency ran into trouble Thursday only hours after it was advanced.

The compromise came from an agreement reached behind closed doors Wednesday night by Assembly Speaker Curt Pringle (R-Garden Grove), Assembly Insurance Committee Chairman David Knowles (R-Placerville) and state Sen. Charles Calderon (D-Whittier), head of a conference committee on the issue.

But its viability was quickly put into question by Senate President Pro Tem Bill Lockyer (D-Hayward), who said Thursday that he does not support it.

Lockyer charged that the new version of the bill potentially put the interests of investors in the plan above those of earthquake victims in case a destructive quake occurs.

“So far, as I have heard the product of Speaker Pringle’s work, it is how to protect insurance companies, not how to protect homeowners,” he said. “My values are the opposite. . . . Homeowners should be the purpose of our policy, not an afterthought.”

Pringle’s office did not respond to a call for comment.

But Calderon said that in the compromise the proposed agency is much better for consumers than the original concept approved by the Legislature last year. “It is financially stronger, will provide a better product and at a better price,” he said.

Impetus for creation of the proposed California Earthquake Authority comes from insurance companies’ desires to cap their exposure to quake losses after making $14.5 billion in payouts after the Northridge earthquake.

First attempts by Pringle, Knowles and Calderon to explain the provisions of their bill at a news conference went awry. Their presentation disintegrated into confusion after the three lawmakers were unable to articulate clearly the contents of the proposal or produce copies of the bill. They said no copy of the legal language would be available until late today.

Later, Calderon released a statement listing details, saying the compromise package would provide coverage for condominium owners as well as for other homeowners. It would include household contents coverage of $5,000 and, initially, $1,500 in coverage for additional living expenses.

As the new agency accumulated surpluses, some levels of coverage would increase, but policies would be limited to the main dwelling.

Customers would have to buy additional coverage for pools, outbuildings and landscaping.

(Associated Press, quoting unidentified legislative negotiators, said the average cost statewide of the basic policy would be about $3.40 per $1,000 of property covered, although prices would vary in areas of different seismic risk).

In an interview, Calderon characterized the proposal as a “defensible product,” but conceded that without Lockyer’s support the plan faced a steep fight with fellow Senate Democrats.

Three consumers groups--the Proposition 103 Enforcement Project, United Policyholders and the Consumers Union--issued a statement blasting the lawmakers for allegedly seeking to keep from the public the precise agreements they had reached.

Betsy Imholz of the Consumers Union called the situation “really outrageous.”

“It’s a very complex proposal, and for the members and the conferees, not to mention the general public, to get a chance to analyze it and digest it, they’ve got to be given adequate time to review the thing and have public discussion about it,” she said.

However, Dan Dunmoyer, lobbyist for the Personal Insurance Federation, said the procedures followed by the legislators are normal.

“Everyone will want to read the language of this,” he said. “We’re as concerned about this as they are. We have to write a check to create this thing and they don’t.”

Calderon said the six-member conference committee will take extensive testimony on the plan beginning Monday before it votes. “It’s the best product that can be produced given the political dynamic in the Assembly and the Senate,” he said.

If the plan is approved by the conference committee, votes would normally take place on the floors of the Assembly and Senate within days. But Lockyer suggested that in this case he would refer the matter for rehearing by other committees.

Another complicating factor is that even if the plan wins legislative approval and is signed by the governor, creation of the proposed agency would not take place unless the IRS granted it a federal tax exemption.