BILL ANALYSIS Ó AB 2406 Page 1 ASSEMBLY THIRD READING AB 2406 (Buchanan) As Amended April 23, 2012 Majority vote INSURANCE 13-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Solorio, Hagman, |Ayes:|Fuentes, Harkey, | | |Bradford, | |Blumenfield, Bradford, | | |Charles Calderon, Carter, | |Charles Calderon, Campos, | | |Feuer, | |Davis, Donnelly, Gatto, | | |Beth Gaines, Hayashi, | |Hall, Hill, Lara, | | |Miller, Olsen, Skinner, | |Mitchell, Nielsen, Norby, | | |Torres, Wieckowski | |Solorio, Wagner | | | | | | ----------------------------------------------------------------- SUMMARY : Requires the Insurance Commissioner (commissioner) to publish on the Department of Insurance (DOI) Internet Web site all requests for a finding of eligibility to seek compensation, and all findings of eligibility to be compensated, with respect to parties intervening in rate change request proceedings. EXISTING LAW : 1)Provides, based on initiative statute (Proposition 103, adopted by the voters at the November, 1988 General Election), for a comprehensive system of rate regulation for property-casualty insurance rates administered by the commissioner. 2)Provides, based on initiative statute, that a property-casualty insurer may not charge any rate unless and until it has obtained the prior approval of the commissioner. 3)Specifies, based on initiative statute, when hearings may or must be held by the commissioner on rate change requests, and requires that specified provisions of the Administrative Procedures Act shall apply at these hearings. 4)Authorizes, based on initiative statute, "Consumer Participation" in these rate change proceedings, specifically authorizing "any person" to intervene in any proceeding AB 2406 Page 2 permitted or required by the initiative statute. 5)Requires, based on initiative statute, the commissioner or a court to award reasonable advocacy and witness fees to a person who demonstrates that he or she represents the interests of consumers and has made a substantial contribution to the adoption of any order, regulation or decision of the commissioner or a court. 6)Provides, based on regulations adopted by the commissioner, that a proceeding within the meaning of these provisions of law commences with the filing of a rate change request. 7)Provides, based on regulations adopted by the commissioner, that the right to intervene will be granted to any party that has relevant issues to raise. The "substantial contribution" which entitles the intervener to compensation is determined at the end of the proceedings. FISCAL EFFECT : According to the Assembly Appropriations Committee, minor absorbable costs to the DOI to post the information required by the bill on the DOI Internet Web site. COMMENTS : Purpose . According to the author, while the right to intervene is contained in statute, virtually all of the details concerning how to request to intervene, what information is required, and how the DOI will evaluate the requests are contained in regulations. This bill is designed to ensure that the materials, and subsequent determinations by the commissioner, are posted on the DOI Internet Web site to ensure maximum public access to the information. Majority vote vs. two-thirds vote . As a general rule, initiatives are not amendable by the Legislature unless the initiative itself grants the Legislature that authority. The law is also clear that an initiative can place conditions on the power of the Legislature to amend the initiative. On the other hand, the Legislature has plenary authority, subject to various constitutional exceptions, to legislate on a majority vote basis on any matter before it. Thus, a question can arise whether a particular bill proposal is amending "initiative statute" (and therefore subject to the initiative's restrictions), or whether AB 2406 Page 3 the bill proposal is not doing so, and therefore subject to the rules governing the Legislature's plenary authority. Proposition 103 contains a provision that limits legislative amendments to the initiative statute by imposing two requirements: first, the legislative amendment to the initiative statute must be passed by a two-thirds vote of each house; second, any amendment to the initiative statute must further the purposes of the initiative. (The courts have determined that whether or not a particular amendment furthers the purposes of the initiative is for the courts, and not the Legislature, to determine.) Legislative Counsel has determined that the bill's requirement that certain data be posted to the DOI Internet Web site does not constitute an amendment to the initiative statute because the requirement does not change the effect of any provision of the initiative. As a result, the vote requirement tag is "majority." Clearly, an amendment to an Insurance Code provision outside of the article adopted by Proposition 103 that materially changes the effect of the initiative statute would result in a two-thirds vote requirement. Similarly, an amendment within the article adopted by Proposition 103 that effects no change to any provision of law enacted by the initiative statute does not require a two-thirds vote because it does not effect any change to what the voters enacted. The new subdivision proposed by this bill would be added to an Insurance Code section that is in the article adopted by Proposition 103. Despite Legislative Counsel's determination that the bill's provisions do not effect any change to any provision of the initiative statute, Consumer Watchdog objects to the majority vote tag, arguing that any change to the Insurance Code sections adopted by Proposition 103 necessarily constitute an amendment to the initiative statute, requiring compliance with the initiative's two restrictions on legislative amendments. Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086 FN: 0003613 AB 2406 Page 4