Progress Seen on Earthquake Insurance Bill

Ten days after the bill creating a state earthquake insurance authority stalled in the state Senate, the Senate’s Democratic leader says insurance lobbyists are moving toward accepting a more consumer-friendly bill.

State Sen. Bill Lockyer (D-Hayward) named three amendments as central to fashioning a compromise that he and the Senate’s Democratic majority can accept.

Thirteen Democrats, including Lockyer, voted against the bill July 11, and it came up six votes short of obtaining a required two-thirds majority in the Senate, one day after the Republican-controlled Assembly approved it.

The deadlock will persist at least through the Legislature’s summer recess ending Aug. 5--despite complaints by some homeowners that, in the meantime, both earthquake and homeowners insurance policies are becoming increasingly difficult and costly to obtain.

Lockyer said one amendment would seek to put the interests of policyholders over those of investors if a big quake exhausted the new authority’s resources.

The second would increase the amount that insurance companies would contribute initially to the authority--to $3 billion from $1 billion--and extend the period that the state would hold the money, possibly to more than 10 years.

The third would reduce the disparity between Bay Area and Southern California rates. The state’s initial plan was to charge Bay Area policyholders about 60% more than Los Angeles area homeowners.

Lockyer did not call acceptance of all these amendments essential, and he continued to assert that he is not making the earthquake insurance bill a leadership issue in which he expected other Democrats to follow him. Nonetheless, he appeared determined to at least get some changes before the bill is passed.

A leading industry lobbyist, Dan Dunmoyer of the Personal Insurance Federation, said late last week that there is some give in the insurers’ position.

But Dunmoyer spoke of “adjustments,” not substantive changes, in the earthquake bill, and an aide to Gov. Pete Wilson warned that if Lockyer and other Senate Democrats “really want some substantive changes, the whole deal can break down.”

A solid Republican vote was cast for the earthquake authority--under which the state would assume control over residential earthquake insurance--in both the Assembly and Senate.

But the floor manager for the bill in the Senate was a Democrat, Charles M. Calderon of Whittier, who drafted the defeated version in a series of private meetings with Assembly Speaker Curt Pringle (R-Garden Grove) and Assembly Insurance Committee Chairman David Knowles (R-Placerville).

Calderon struggled mostly unsuccessfully July 11 to secure additional support for the bill in the Senate, but he now concedes that changes will have to be made before it is passed. He said last week that when the changes are made, some might call them “substantive,” while others prefer to call them mere “adjustments.”

“I believe we will make substantive changes,” Calderon said, predicting that they will include an amendment by Sen. Patrick Johnston (D-Stockton) that would require the $3-billion insurer investment, but not a more sweeping proposal by Sen. Herschel Rosenthal (D-Los Angeles) for an even more extensive investment by the insurance industry.

A spokesman for state Insurance Commissioner Chuck Quackenbush, an initiator of the earthquake authority bill, said Quackenbush will accept any reasonable compromise.

During the July 11 Senate debate, Calderon, Johnston and Sen. Steve Peace (D-Chula Vista) met behind closed doors with about 30 insurance, banking and Realtor lobbyists in a room near the Senate chamber to try to gauge what concessions would be acceptable to the interests they represented.

“The whole thrust of the meeting was to push the industry to accept some changes in the bill,” Calderon said.

But Dunmoyer said the lobbyists broke off the meeting when the legislators could give no assurance that if concessions were made, the bill would pass that night.

“It was not clear what we had to do,” Dunmoyer said. “I had to ask the obvious question: If we accepted all these issues, would it pass. And the answer was no. So what was the point of the meeting?”

Two other lobbyists, Lynnea Olson of the Assn. of California Insurance Companies and Alex Creel of the California Assn. of Realtors, agreed with Dunmoyer’s characterization of what happened.

But Peace disagreed with that account. He said the lobbyists indicated that they could make no commitment to the Johnston amendment without checking with their clients.

“If they’d had an ability to answer positively, absolutely yes, we had the votes to pass the bill that night,” Peace said.

The very nature of the lobbyists-legislators meeting was deplored by Harry Snyder, representing the Consumers Union, which has been opposing the earthquake authority as a bailout for insurers and a bad deal for consumers.

Snyder said he was unhappy that the Consumers Union was not invited to the meeting. But more than that, he said, his group opposes making public policy in closed-door gatherings of legislators and lobbyists rather than in public committee hearings.

“This whole thing had a ‘fraternity’ aspect to it,” Snyder said. “When Calderon came out into the hall and summoned the lobbyists, there was a lot of slapping on the back and banter about including this one and that one.”

Lockyer, however, said that the Republican leadership was objecting to reconvening a conference committee and that the private discussions are the best alternative.

Lockyer also complained that some have exaggerated the difficulties of getting insurance. Homeowners policies are available at a reasonable price from some insurers, he said, naming Mercury and Zenith.

But Dunmoyer said he sees an increasingly hostile marketplace, with the 20th Century insurance company getting out of the homeowners insurance business and canceling 18,000 policies a month, creating a situation in which the Legislature may eventually feel it has to act.

Some insurance buyers have called The Times in recent days with complaints that, having had their homeowners policies canceled or earthquake policies reduced, they have found it difficult to obtain insurance--and then often at prices up to three times what they had been paying.

Homeowners and earthquake insurance are linked because of the state’s 11-year-old legal requirement that insurers offering homeowners coverage must also offer earthquake coverage.

In the wake of the 1994 Northridge earthquake, insurers paid $14.5 billion in damage claims, including $8.5 billion for residential damage.

Since then, they have been seeking to reduce their exposure, limiting policy sales in both homeowners and earthquake insurance and seeking to get the state to cap their liability for paying earthquake damage by setting up the earthquake authority.