BILL NUMBER: AB 1098 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 7, 2012
AMENDED IN ASSEMBLY MARCH 31, 2011
INTRODUCED BY Assembly Member Hagman
( Coauthor: Assembly Member
Solorio )
( Coauthors: Senators
Calderon and Gaines )
FEBRUARY 18, 2011
An act to amend Section 758 790.03
of the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 1098, as amended, Hagman. Insurance: unlawful
practices. unfair methods of competition: automotive
repair.
Existing law makes it unlawful for an insurer to require
an auto body repair shop, as a condition of participation in the
insurer's direct repair program, to pay for the cost of an insured's
rental vehicle that is replacing an insured vehicle damaged in an
accident, or to pay for the towing charges of the insured with
respect to that accident. Existing law authorizes a registered auto
body repair shop, denied participation in an insurer's direct repair
program, to report the denial to the Department of Insurance, which
maintains a record of those denials, and requires an insurer, upon
the request of the department, to disclose the fact that a denial was
made defines unfair methods of competition and unfair
and deceptive acts or practices in the business of
insurance, including knowingly committing or performing with such
frequency as to indicate a general business practice of various
unfair claims settlement practices, such as not attempting in good
faith to effectuate prompt, fair, and equitable settlements of claims
in which liability has become reasonably clear. If a person engages
in any unfair method of competition or any unfair or deceptive act or
practice, that person may be subject to a civil penalty fixed by the
Insurance Commissioner .
This bill would require the department's request that an
insurer disclose the fact that a denial of participation in its
direct repair program was made be in writing add to
the list of unfair claims settlement practices (1) failing to
estimate the cost of automotive repairs in accordance with accepted
trade standards for good and workmanlike automotive repair, (2)
adjusting a claimant's written repair estimate, if the repair costs
will exceed the written repair estimates, without providing specified
information, including edited copies of either the insurer's
estimate or the claimant's auto body repair shop estimate, and (3)
requiring the use of nonoriginal equipment manufacturer replacement
crash parts in the repair of an automobile .
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 790.03 of the
Insurance Code is amended to read:
790.03. The following are hereby defined as unfair methods of
competition and unfair and deceptive acts or practices in the
business of insurance.
(a) Making, issuing, circulating, or causing to be made, issued or
circulated, any estimate, illustration, circular, or statement
misrepresenting the terms of any policy issued or to be issued or the
benefits or advantages promised thereby or the dividends or share of
the surplus to be received thereon, or making any false or
misleading statement as to the dividends or share of surplus
previously paid on similar policies, or making any misleading
representation or any misrepresentation as to the financial condition
of any insurer, or as to the legal reserve system upon which any
life insurer operates, or using any name or title of any policy or
class of policies misrepresenting the true nature thereof, or making
any misrepresentation to any policyholder insured in any company for
the purpose of inducing or tending to induce the policyholder to
lapse, forfeit, or surrender his or her insurance.
(b) Making or disseminating or causing to be made or disseminated
before the public in this state, in any newspaper or other
publication, or any advertising device, or by public outcry or
proclamation, or in any other manner or means whatsoever, any
statement containing any assertion, representation, or statement with
respect to the business of insurance or with respect to any person
in the conduct of his or her insurance business, which is untrue,
deceptive, or misleading, and which is known, or which by the
exercise of reasonable care should be known, to be untrue, deceptive,
or misleading.
(c) Entering into any agreement to commit, or by any concerted
action committing, any act of boycott, coercion, or intimidation
resulting in or tending to result in unreasonable restraint of, or
monopoly in, the business of insurance.
(d) Filing with any supervisory or other public official, or
making, publishing, disseminating, circulating, or delivering to any
person, or placing before the public, or causing directly or
indirectly, to be made, published, disseminated, circulated,
delivered to any person, or placed before the public any false
statement of financial condition of an insurer with intent to
deceive.
(e) Making any false entry in any book, report, or statement of
any insurer with intent to deceive any agent or examiner lawfully
appointed to examine into its condition or into any of its affairs,
or any public official to whom the insurer is required by law to
report, or who has authority by law to examine into its condition or
into any of its affairs, or, with like intent, willfully omitting to
make a true entry of any material fact pertaining to the business of
the insurer in any book, report, or statement of the insurer.
(f) (1) Making or permitting any unfair discrimination between
individuals of the same class and equal expectation of life in the
rates charged for any contract of life insurance or of life annuity
or in the dividends or other benefits payable thereon, or in any
other of the terms and conditions of the contract.
(2) This subdivision shall be interpreted, for any contract of
ordinary life insurance or individual life annuity applied for and
issued on or after January 1, 1981, to require differentials based
upon the sex of the individual insured or annuitant in the rates or
dividends or benefits, or any combination thereof. This requirement
is satisfied if those differentials are substantially supported by
valid pertinent data segregated by sex, including, but not limited
to, mortality data segregated by sex.
(3) However, for any contract of ordinary life insurance or
individual life annuity applied for and issued on or after January 1,
1981, but before the compliance date, in lieu of those differentials
based on data segregated by sex, rates, or dividends or benefits, or
any combination thereof, for ordinary life insurance or individual
life annuity on a female life may be calculated as follows: (A)
according to an age not less than three years nor more than six years
younger than the actual age of the female insured or female
annuitant, in the case of a contract of ordinary life insurance with
a face value greater than five thousand dollars ($5,000) or a
contract of individual life annuity; and (B) according to an age not
more than six years younger than the actual age of the female
insured, in the case of a contract of ordinary life insurance with a
face value of five thousand dollars ($5,000) or less. "Compliance
date" as used in this paragraph shall mean the date or dates
established as the operative date or dates by future amendments to
this code directing and authorizing life insurers to use a mortality
table containing mortality data segregated by sex for the calculation
of adjusted premiums and present values for nonforfeiture benefits
and valuation reserves as specified in Sections 10163.1 and 10489.2
or successor sections.
(4) Notwithstanding the provisions of this subdivision, sex-based
differentials in rates or dividends or benefits, or any combination
thereof, shall not be required for (A) any contract of life insurance
or life annuity issued pursuant to arrangements which may be
considered terms, conditions, or privileges of employment as these
terms are used in Title VII of the Civil Rights Act of 1964 (Public
Law 88-352), as amended, and (B) tax sheltered annuities for
employees of public schools or of tax exempt organizations described
in Section 501(c)(3) of the Internal Revenue Code.
(g) Making or disseminating, or causing to be made or
disseminated, before the public in this state, in any newspaper or
other publication, or any other advertising device, or by public
outcry or proclamation, or in any other manner or means whatever,
whether directly or by implication, any statement that a named
insurer, or named insurers, are members of the California Insurance
Guarantee Association, or insured against insolvency as defined in
Section 119.5. This subdivision shall not be interpreted to prohibit
any activity of the California Insurance Guarantee Association or the
commissioner authorized, directly or by implication, by Article 14.2
(commencing with Section 1063).
(h) Knowingly committing or performing with such frequency as to
indicate a general business practice any of the following unfair
claims settlement practices:
(1) Misrepresenting to claimants pertinent facts or insurance
policy provisions relating to any coverages at issue.
(2) Failing to acknowledge and act reasonably promptly upon
communications with respect to claims arising under insurance
policies.
(3) Failing to adopt and implement reasonable standards for the
prompt investigation and processing of claims arising under insurance
policies.
(4) Failing to affirm or deny coverage of claims within a
reasonable time after proof of loss requirements have been completed
and submitted by the insured.
(5) Not attempting in good faith to effectuate prompt, fair, and
equitable settlements of claims in which liability has become
reasonably clear.
(6) Compelling insureds to institute litigation to recover amounts
due under an insurance policy by offering substantially less than
the amounts ultimately recovered in actions brought by the insureds,
when the insureds have made claims for amounts reasonably similar to
the amounts ultimately recovered.
(7) Attempting to settle a claim by an insured for less than the
amount to which a reasonable person would have believed he or she was
entitled by reference to written or printed advertising material
accompanying or made part of an application.
(8) Attempting to settle claims on the basis of an application
which was altered without notice to, or knowledge or consent of, the
insured, his or her representative, agent, or broker.
(9) Failing, after payment of a claim, to inform insureds or
beneficiaries, upon request by them, of the coverage under which
payment has been made.
(10) Making known to insureds or claimants a practice of the
insurer of appealing from arbitration awards in favor of insureds or
claimants for the purpose of compelling them to accept settlements or
compromises less than the amount awarded in arbitration.
(11) Delaying the investigation or payment of claims by requiring
an insured, claimant, or the physician of either, to submit a
preliminary claim report, and then requiring the subsequent
submission of formal proof of loss forms, both of which submissions
contain substantially the same information.
(12) Failing to settle claims promptly, where liability has become
apparent, under one portion of the insurance policy coverage in
order to influence settlements under other portions of the insurance
policy coverage.
(13) Failing to provide promptly a reasonable explanation of the
basis relied on in the insurance policy, in relation to the facts or
applicable law, for the denial of a claim or for the offer of a
compromise settlement.
(14) Directly advising a claimant not to obtain the services of an
attorney.
(15) Misleading a claimant as to the applicable statute of
limitations.
(16) Delaying the payment or provision of hospital, medical, or
surgical benefits for services provided with respect to acquired
immune deficiency syndrome or AIDS-related complex for more than 60
days after the insurer has received a claim for those benefits, where
the delay in claim payment is for the purpose of investigating
whether the condition preexisted the coverage. However, this 60-day
period shall not include any time during which the insurer is
awaiting a response for relevant medical information from a health
care provider.
(17) Failing to estimate the cost of automotive repairs in
accordance with accepted trade standards for good and workmanlike
automotive repair. Estimates shall allow for repairs to be made by
auto body repair shops, as defined in Section 9889.51 of the Business
and Professions Code. The estimates shall be based on any of the
following:
(A) Original equipment manufacturer repair specifications.
(B) Nationally distributed and periodically updated collision
estimating guides.
(C) Generally accepted practices by the auto body repair and
insurance industries.
(18) If the repair costs will exceed the written repair estimates
prepared by or for the insurer, adjusting a claimant's written repair
estimate without providing one of the following:
(A) An edited copy of the claimant's auto body repair shop
estimate.
(B) An edited copy of the insurer's estimate.
(C) A supplemental estimate prepared by the insurer adjusting the
itemized supplemental request from the claimant's auto body repair
shop.
(19) Requiring the use of nonoriginal equipment manufacturer
replacement crash parts in the repair of an automobile, unless the
insurer specifying the use of nonoriginal equipment manufacturer
replacement crash parts only specified parts that are distributed by
entities that do all of the following:
(A) Agree to pay the cost of any modifications to the parts that
may be necessary to effect the repair.
(B) Agree to pay the cost to the auto body repair shop associated
with returning the part, and to replace the part.
(C) Have in place a program to analyze parts returned with defects
and report the part number, lot number, and nature of each defect to
the manufacturer and any entity that certifies the parts. An insurer
shall obtain from the distributor and report the defect information
identified in this subparagraph to the Department of Insurance upon
request.
(D) Indemnify the auto body repair shop for any part verified by
the distributor to be defective. For purposes of this paragraph, a
part with a defect rate of 5 percent or greater installed in 1,000 or
more vehicles shall be considered to be defective.
(i) Canceling or refusing to renew a policy in violation of
Section 676.10.
SECTION 1. Section 758 of the Insurance Code is
amended to read:
758. (a) It is unlawful for an insurer to require an auto body
repair shop registered pursuant to Sections 9884 and 9889.52 of the
Business and Professions Code, as a condition of participation in the
insurer's direct repair program, to pay for the cost of an insured's
rental vehicle that is replacing an insured vehicle damaged in an
accident, or to pay for the towing charges of the insured with
respect to that accident. However, the insurer and the auto body
repair shop may agree in writing to terms and conditions under which
the rental vehicle charges become the responsibility of the auto body
repair shop when the shop fails to complete work within the
agreed-upon time for repair of the damaged vehicle.
(b) A registered auto body repair shop that is denied
participation in an insurer's direct repair program may report a
denial to the department, which shall maintain a record of all those
denials for the purposes of gathering market conduct information. An
insurer, upon the written request of the department, shall disclose
the fact that a denial was made.
(c) Any insurer that conducts an auto body repair labor rate
survey to determine and set a specified prevailing auto body rate in
a specific geographic area shall report the results of that survey to
the department, which shall make the information available upon
request. The survey information shall include the names and addresses
of the auto body repair shops and the total number of shops
surveyed.