BILL ANALYSIS Ó
SENATE COMMITTEE ON INSURANCE
Senator Richard Roth, Chair
2015 - 2016 Regular
Bill No: AB 447 Hearing Date: July 8,
2015
-----------------------------------------------------------------
|Author: |Maienschein |
|-----------+-----------------------------------------------------|
|Version: |June 2, 2015 Amended |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Urgency: |No |Fiscal: |No |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Consultant:|Erin Ryan |
| | |
-----------------------------------------------------------------
Subject: Property insurance: discrimination.
SUMMARY Prohibits an insurer admitted to issue insurance policies
covering real property designed for human habitation, including
single family homes, condominiums and multiunit commercial
apartments, from failing or refusing to accept an application
for, issue a policy to an applicant for insurance, or cancel a
policy based on the source of income of residential tenants or
the receipt of housing assistance by tenants from the federal or
state government or from a local public entity, and prohibits
the insurer from requiring this information on the application
for insurance, as specified.
DIGEST
Existing law
1) Prohibits an admitted insurer from using sex, race, color,
religion, ancestry, national origin, disability, medical
condition, genetic information, marital status, or sexual
orientation under conditions less favorable to the insured than
in other comparable cases, for purposes of accepting
applications for, issuing policies of, or cancelling policies of
property or commercial insurance.
2) Prohibits using any of these characteristics as a condition or
risk to justify charging a policyholder a higher rate, premium,
or charge for insurance.
AB 447 (Maienschein) Page 2
of ?
3) Prohibits applications for insurance, as specified, from
including any identification of, or requiring an applicant to
provide, any information as to these characteristics.
4) The Insurance Rate Reduction and Reform Act (Proposition 103,
as approved by the voters in 1988) (Prop. 103), requires
specified insurance rates to be approved by the Insurance
Commissioner (IC) prior to their use.
This bill
1) Prohibits an insurer admitted in California to issue
insurance policies covering real property designed for human
habitation, including single family homes, condominiums and
multiunit commercial, from failing or refusing to accept an
application for, issue a policy to an applicant for
insurance, or cancel a policy based on the following
characteristics:
a. The level or source of income of an individual or
group of people residing or intending to reside upon the
property to be insured, if they do not own the property;
b. The receipt of assistance, intended for housing,
from the federal or state government, or from a local
public entity, as defined, including "Section 8"
vouchers, by an individual or group of people residing or
intending to reside upon the property.
2) Prohibits an application for insurance, or a report
furnished by an insurer for use in determining eligibility
for insurance, from having any identification of, or
requirement to provide information as to the characteristics
in paragraph 1, above.
3) Provides that if a property is used for both residential
and commercial purposes, the insurer may consider the source
of income for the non-residential tenant in determining the
insurability of an applicant.
4) Specifies that nothing in the bill prohibits an insurer
from failing or refusing to accept an application, issuing,
canceling or failing to renew, a policy as a result of
AB 447 (Maienschein) Page 3
of ?
underwriting based on any and all factors other than those
expressly prohibited.
COMMENTS
1. Purpose of the bill To prohibit insurers from using the
source of income of, or the use of state or federal housing
assistance by, tenants as a basis to decide whether to
accept an application by the property owner for property
insurance, because it is viewed as a discriminatory
practice.
2. Background Unlike in the highly regulated auto insurance
market, there are relatively few limitations on insurer
underwriting and pricing in the property insurance market.
Insurers must, however, submit their rates for prior
approval of the IC under Prop. 103. Insurers may use a
variety of factors and characteristics to assess the risk
associated with insuring the property, including location,
structural condition, age, design, management of the
property, ownership, maintenance, hazards on the property,
tenants and tenant mix, presence of safety devices such as
fire and smoke alarms, lighting, sports facilities or
swimming pools. Some insurers look at the presence of
subsidized tenants as a factor in evaluating the property's
underwriting risk, and according to the proponents, some
insurers have not offered certain products, or cancelled
policies, because of the presence of subsidized tenants.
As a matter of public policy, insurers are prohibited from
arbitrary and unreasonable discrimination against the
protected classes of the Unruh Civil Rights Act. Those
classes include age, ancestry, color, disability, genetic
information, marital status, national origin, race,
religion, sex, and sexual orientation.
The U.S. Supreme Court took a broad approach to housing
discrimination in its recent decision in Texas Department of
Housing and Community Affairs v. Inclusive Communities
Project, holding that under the federal Fair Housing Act it
is enough to show that minorities are negatively affected,
even if no intent to discriminate has been found.
AB 447 (Maienschein) Page 4
of ?
The housing choice voucher program (Section 8) is the
federal government's major program for assisting very
low-income families, the elderly, and the disabled to afford
decent, safe, and sanitary housing in the private market.
Since housing assistance is provided on behalf of the family
or individual, participants are able to find their own
housing, including single-family homes, townhouses and
apartments. The participant is free to choose any housing
that meets the requirements of the program and is not
limited to units located in subsidized housing projects. A
family that is issued a housing voucher is responsible for
finding a suitable housing unit of the family's choice where
the owner agrees to rent under the program. Rental units
must meet minimum standards of health and safety and the
housing subsidy is paid to the landlord directly by the
public housing authority on behalf of the participating
family. The family then pays the difference between the
actual rent charged by the landlord and the amount
subsidized by the program. The role of the landlord in the
voucher program is to provide decent, safe, and sanitary
housing to a tenant at a reasonable rent. The dwelling unit
must pass the program's housing quality standards and be
maintained up to those standards as long as the owner
receives housing assistance payments. State and local
government programs that proponents point to as similar in
purpose are also included in the bill.
Proponents of this bill argue that some insurers have
discriminated against property owners who participate in
housing assistance programs, treating similarly situated
properties differently, or refusing to offer or renew
policies, simply because of the presence of tenants who have
availed themselves of legitimate government benefits. They
argue this serves as a disincentive for property owners to
participate in these important affordable housing programs,
particularly in high-cost California.
Nothing in the bill prevents an insurance company from
properly underwriting the property for any and all risks, or
from declining to insure a property for any number of
reasons. The insurer would not, however, be able to simply
not offer insurance to the category of properties that allow
Section 8 tenants. This bill was prompted in part by one
AB 447 (Maienschein) Page 5
of ?
company that has refused to offer an apartment policy
product to subsidized, public or government funded
complexes, claiming these properties present unknown,
complex, specialized or higher risk exposures. It further
justified its position because the market is adequately
covered by surplus lines, specialty and niche insurers, risk
retention groups and other insurers that have particular
expertise with subsidized, public or government funded
housing. The insurer in that case had a standard apartment
insurance policy and apparently did no on-site
investigations or underwriting of a property prior to
issuing a policy if information provided on the application
met specified criteria. It should be noted that surplus
lines insurers are not admitted or licensed to offer
insurance in California, and this bill and the
anti-discrimination provision generally, applies only to
admitted insurers.
The fundamental question raised by this bill is whether an
insurer should be able to treat similarly situated
properties differently based simply on the presence of
subsidized tenants. The insurer would be able to use the
underwriting process to determine if the property actually
posed an unacceptable risk, for example if the building was
not properly maintained, if it posed higher safety concerns,
or if it had a history of claims. None of these conditions
or problems would be unique to subsidized housing. At the
same time, some insurers claim that insurers may have
particular expertise in the types of properties they have
chosen to insure. They believe that any restrictions on
their ability to evaluate the type of property can eliminate
flexibility, skew underwriting, and result in market
dislocations.
3. Support Housing California has sponsored AB 447 to ensure
that a property owner would not be forced to discriminate
against tenants based on the source of their income. The
California Apartment Association (CAA) supports AB 447
because admitted insurers in California have ben refusing to
cover properties that accept Housing Choice Vouchers,
forcing CAA's members to obtain significantly more expensive
coverage from non-admitted insurers or terminate their
participation in the Voucher program. The viability of the
AB 447 (Maienschein) Page 6
of ?
Housing Choice Voucher Program is entirely dependent on the
availability of housing in the private market.
4. Opposition According to the American Insurance
Association, AB 447 would force property insurers to provide
coverage of rental properties without the ability to
properly evaluate risk. Restrictions and limitations on
underwriting adversely affect the ability of carriers to
properly rate and make coverage determinations. Currently
there is market availability of insurance for multi-family
low-income or rent subsidized rental properties from
admitted insurers, surplus lines carriers, specialty and
niche carriers and risk retention groups. There is no need
to force property insurers to provide insurance without the
ability to consider all relevant factors that may affect the
risks being insured.
The Association of California Insurance Companies opposes AB
447 because it prevents insurers from considering all
relevant information in the provision of coverage to owners
of residential rental property-in this case whether a
building owner has chosen to rent to tenants whose rents are
subject to subsidies. Absent an availability crisis, and
with rates approved by the department of Insurance, it seems
inappropriate to place restrictions on a company's
underwriting ability.
POSITIONS
Support
California Coalition for Rural Housing (sponsor)
Housing California (sponsor)
Western Center on Law and Poverty (sponsor)
California Apartment Association
California Housing Consortium
City of Berkeley Rent Stabilization Board
Community Housing Works
Downtown Women's Center
First Place for Youth
Housing Leadership Council of San Mateo County
Law Foundation of Silicon Valley
AB 447 (Maienschein) Page 7
of ?
LINC Housing
Northern Circle Indian Housing Authority
Path Ventures
Project Sentinel
Sacramento Homeless Organizing Committee
San Diego County Apartment Association
Skid Row Housing Trust
Oppose
American Insurance Association
Association of California Insurance Companies
-- END --