Garamendi to Push for Policy Renewal Rules

Efforts to prevent insurance companies from not renewing homeowners’ policies after a claim has been filed will go forward despite a legal setback, Insurance Commissioner John Garamendi said Wednesday.

The Third Appellate District Court of Appeal on Monday upheld a lower court ruling that Garamendi didn’t have the legal authority to issue regulations outlawing what the commissioner calls “use it and lose it” underwriting by insurers.

Garamendi said he proposed the emergency regulations last year in response to widespread complaints from consumers that their insurers discouraged them from putting in legitimate claims by threatening to drop coverage. The commissioner said he would decide soon whether to appeal Monday’s ruling to the state Supreme Court or to lobby the Legislature for a law barring the practice.

“Homeowners, who should gain peace of mind through a policy that is supposed to protect their most important investment, are afraid to even use the policy,” Garamendi said in a statement released by his office. “ ‘Use it and lose it’ is wrong, it’s unreasonable and I will continue my fight until it ends.”

Lawmakers have tried and failed the last two years to pass a law that would protect homeowners who had their policies canceled after filing claims. Insurance lobbyists convinced the state Assembly that a curb on non-renewals could lead to higher premiums for the 75% of policyholders who keep their homes in good condition and never file a claim.

Garamendi scored a partial victory last year when Gov. Arnold Schwarzenegger signed a bill that gave victims of federally declared disasters -- such as the 2003 wildfires in Southern California -- the right to have their homeowners’ policies automatically renewed for one year, regardless of whether they filed a claim. Insurers supported the proposal, saying they had no desire to deny coverage while a home was being rebuilt.

The problem of homeowners having difficulties buying insurance after filing claims appeared to have peaked during the tight market of 2000 and 2001, said Brian Perkins, a consultant to the Senate Insurance Committee.

“The market is better now, and we’re not getting as many complaints,” he said.