California insurers are fuming over a last-minute regulatory move by former Insurance Commissioner John Garamendi.
The move requires them to pay more for challenges to proposed rate increases. They’re calling upon new Commissioner Steve Poizner to reconsider Garamendi’s action.
Under California’s Proposition 103, when a policyholder or consumer group files a challenge to a proposed rate increase, the insurer must pick up the tab if the state Department of Insurance rules in favor of the challenger.
These “intervener fees”,which run from $15,000 to $30,000 per case and can go as high as $60,000,are a lifeline for consumer groups such as the Foundation for Taxpayer and Consumer Rights. They help pay for actuaries and other experts that consumer groups might call to dispute a proposed increase.
In the past two years alone, the foundation has collected fees in at least two dozen instances.
Insurance companies grudgingly paid the fees, chalking it up as a cost of doing business. Their attitude abruptly changed when they learned about the “clarifying regulation” Garamendi promulgated in December.
The regulation requires insurers to pay intervener fees even if there is no official Insurance Department proceeding. Frequently, insurance companies will withdraw rate increase proposals before they can be heard by the department, especially if they learn of a challenge.
The new regulation also provides for the fees in instances not previously covered, such as disputes over the establishment of classes of ratepayers. (That would have provided for fees in the recent dispute over the use of ZIP codes in setting automobile insurance rates.)
Insurance companies not only are complaining about the expansion of the fees,which they contend will provide lawyers more reasons to sue,but also demanding the department release details about how it calculates the fees.
As expected, consumer groups strongly back Garamendi’s action. Doug Heller, executive director of the consumer foundation, said the intervener program needs to be expanded because ratepayers and consumer groups don’t have the resources to challenge rate increases as often as they should.
Both sides said they do not intend to go to court over the dispute. But both acknowledged it might end up there anyway.
More Toxic Codes
State manufacturers are up in arms over a proposal to expand the number of codes used for hazardous waste.
The state Department of Toxic Substances Control recently said it intends to revise the existing list of hazardous waste codes to comply with an eight-year-old state law. It requires the agency to distinguish between wastes considered hazardous under federal law from those considered hazardous under state law.
But the California Manufacturers and Technology Association in Sacramento contends that the regulatory proposal goes further, creating a “confusing” system that “will require considerable cost and effort by (hazardous waste) generators as well as treatment, storage and disposal facilities throughout the state.”
One manufacturer said it would have to put in place multiple codes for a single hazardous waste product like used oil, according to the trade group.
“Used oil has four separate codes depending on what type of motor vehicle it came from and whether it has been mixed with something,” said the manufacturer, who declined to be identified, not unusual in an industry that frequently has to deal with state inspectors.
In workshop presentations, Department of Toxic Substances Control officials said the current system of just allowing one code for products like used oil wasn’t working.
For more information, log onto the department’s Web site at dtsc.ca.gov and click on the “Laws, Regs and Policies” link.
New Building Standards
Homebuilders won some and lost some with the release of revised state building standards earlier this month.
After a 20-year fight, California homebuilders won the right to use cheaper plastic piping instead of copper. But homebuilders and commercial builders in the state’s coastal zones will have to shell out more to make structures more resistant to earthquakes and fires. The revised standards were adopted by the California Building Standards Commission earlier this month and are set to go into effect by the end of this year.
Builders have long sought to use chlorinated polyvinyl chloride pipes, which generally cost about one-fourth the cost of copper. Environmental, consumer and labor groups opposed this, saying the pipes leached chemicals into the soil and glue used to bind segments emitted harmful fumes. Until now, the plastic pipes only could be used when it could be shown that copper pipes were failing prematurely.
But the Building Standards Commission also heard from environmentalists concerned about residue from copper piping leaching into water systems, especially in San Francisco Bay.
“We were discovering more and more issues with copper piping,” said Dave Walls, the commission’s executive director.
Meanwhile, the commission also made use of new earthquake and fire safety technologies to overhaul those sections of the building code. Essentially, Walls said, in coastal zones more prone to earthquake damage, builders will have to use the latest technologies to reduce the stress on buildings from earthquakes, such as more shear walls. And in fire danger areas there will be a ban on most wood sidings.
Overall, Walls said these earthquake and fire regulations probably will cost builders more. But buildings adhering to the measures could see lower insurance rates.
For more information on the building standards, log onto the commission’s Web site at bsc.ca.gov.
Fine is a staff writer with the Los Angeles Business Journal.
