This law would help lessen the impact of being harmed by underinsured motorists who have inadequate insurance to compensate people for the harms that they have caused. This is an article from the O.C. Register:
Meet Ed Farber, an 82-year-old retired businessman from Huntington Beach. He learned the hard way about a loophole in the state’s insurance laws.
Farber purchased $100,000 underinsured motorist coverage. Underinsured motorist policies pay for your injuries if the other driver is responsible for an accident, but didn’t purchase enough coverage to cover your medical bills. Farber thought when he bought the policy that if he was ever in an accident and needed additional coverage his insurance company, 21st Century, would pay $100,000 on top of whatever was paid by the other driver’s insurance.
Then one day Farber was driving west on Yorktown Avenue in Huntington Beach when another driver turned left in front him. Both cars were totaled and Farber was taken by ambulance to UC Irvine Medical Center, where a titanium plate was surgically implanted in his wrist. His treatment continues, but so far he’s racked up more than $169,000 in medical bills.
The other driver had purchased $50,000 in coverage. Combined with his underinsured motorist policy, Farber expected to get the $50,000 from the offending driver and the $100,000 from his insurance company, for a total of $150,000, to cover his bills.
Instead, he got only $100,000. Why? Because California law dictates that insurance companies only have to pay the difference between the value of an underinsured motorist policy, and the coverage of the other driver.
In Farber’s case, 21st Century subtracted the other driver’s $50,000 from Farber’s $100,000 coverage, and determined it only owed the retiree another $50,000.
In other words, Farber bought $100,000 worth of coverage but only received half its value. A tragedy, Farber’s lawyer, M. Lawrence Lallande, called it, but completely legal under the law.
HELP ON THE WAY
Bradford
Luckily for Farber, there’s a bill in the Legislature to address this very issue. Assembly Bill 1063, by Assemblyman Steven Bradford, D-Los Angeles, would change state law so that insurance companies h
ave to pay up to value of the underinsured motorist plan if the other driver’s policy doesn’t cover all of the damages. No more subtracting one policy from another.
The bill is supported by the Congress of California Seniors, Consumer Attorneys of California (who are also the bill’s sponsor), the Consumer Federation of California and Consumer Watchdog, who argue the legislation provides simple fairness and transparency. It also could make trial lawyers more money.
It’s opposed, however, by the insurance industry, which is concerned that changing the law would end up costing insurance companies more — and provide more money to trial attorneys. And that’s where it gets real interesting.
AN UNUSUAL MOVE
AB 1063 was heard in the Assembly Committee on Insurance on May 4. The committee is chaired by Orange County Assemblyman Jose Solorio, D-Santa Ana. Solorio was named chair in June 2009. From the time when he started raising money for an initial legislative run in 2005 until the day he was appointed chair, Solorio raised $67,000 from the insurance industry. After he was named chair, he raised another $79,000, in less than half the time.
To put it another way, during his first run for the Legislature, during the 2005-06 cycle, 1 percent of his funds came from the insurance industry. During the 2009-10 cycle, 11 percent came from insurance.
Anyway, Solorio presided when AB 1063 was heard. The insurance committee is composed of 12 lawmakers. The bill needed seven votes to get passed out on a full committee vote, which is what Assemblyman Bradford, its sponsor, wanted.
But the committee was not on his side.
So instead, Solorio made a motion to reassign AB 1063 so it could be studied further, which for the time being stops the bill in its tracks.
Of the nine committee members present, six voted for Solorio’s motion and he declared it passed.
Immediately, Solorio was questioned: How did that pass with only six votes? Without hesitation Solorio said he had looked into the matter before the vote and been told six votes was all that was needed. It was a highly unusual legislative maneuver — but it derailed the bill and kept the insurance loophole.
“Most people have never seen it, that’s what I’m told,” said John Montevideo, president of Consumer Attorneys of California and a practicing attorney from Santa Ana.
ASSEMBLYMAN’S EXPLANATION
Solorio
Solorio said contributions by the insurance industry did not influence his action on the bill. In fact, he noted that one of the bills he’s authoring, AB 53, which would require insurance companies to develop plans to increase their contracting with women and minority owned business, is opposed by the insurance industry. The assemblyman also has taken thousands of dollars in campaign contributions from consumer attorneys.
“Campaign contributions never influence my votes,” Solorio said.
Rather, the assemblyman said he had serious policy questions about AB 1063 as originally written. Specifically, he was concerned that the change proposed by the bill would raise automotive insurance rates for Californians.
But the assemblyman said he also understood how consumers might be unclear about the true value of the underinsured motorist coverage they purchase. That’s why he proposed making the AB 1063 into a study bill — so the Legislature could explore better disclosure on uninderinsured motorist policies.
As for how he knew the bill could be made into a study bill on only a six-person vote, Solorio said that was simply because he knows the rules and procedures of the legislature. He said he didn’t research the matter specifically because of that bill.
“It’s my responsibility to know the rules of the house,” he said.
Now, the issues raised by AB 1063 will be studied by the Legislature. Trial attorneys are upset — they think believe a worthwhile bill was killed. Solorio, on the other hand, says he saved the bill as best he could, given that it didn’t have support on the committee.