BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 447|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: AB 447
Author: Maienschein (R), et al.
Amended: 6/30/15 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE: 6-1, 7/8/15
AYES: Roth, Glazer, Hall, Hernandez, Liu, Wieckowski
NOES: Gaines
NO VOTE RECORDED: Berryhill, Mitchell
ASSEMBLY FLOOR: 75-4, 6/4/15 - See last page for vote
SUBJECT: Property insurance: discrimination
SOURCE: California Coalition for Rural Housing
Housing California
Western Center on Law and Poverty
DIGEST: This bill 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 insurance, 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.
AB 447
Page 2
ANALYSIS:
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.
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) Requires, under the Insurance Rate Reduction and Reform Act
(Proposition 103, as approved by the voters in 1988),
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 apartment buildings, from failing or
refusing to accept an application for insurance, 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
AB 447
Page 3
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 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 an insurer is not prohibited from failing or
refusing to accept an application, issuing, canceling or
failing to renew, a policy as a result of underwriting based
on any and all factors other than those expressly
prohibited.
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 Proposition 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.
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Page 4
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.
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.
Similar state and local government programs that are similar in
purpose are also included in this bill.
AB 447
Page 5
Nothing in AB 447 prevents an insurance company from
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 not offer insurance to
the category of properties that allow subsidized tenants. This
bill was prompted in part by one company that has refused to
offer an apartment policy product to owners of 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 is whether an insurer should be able to
treat similarly situated properties differently based 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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified7/9/15)
California Coalition for Rural Housing (co-source)
Housing California (co-source)
Western Center on Law and Poverty (co-source)
California Apartment Association
California Housing Consortium
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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
LINC Housing
Northern Circle Indian Housing Authority
Path Ventures
Project Sentinel
Sacramento Homeless Organizing Committee
San Diego County Apartment Association
Skid Row Housing Trust
OPPOSITION: (Verified7/9/15)
American Insurance Association
Association of California Insurance Companies
ARGUMENTS IN SUPPORT: 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. This
serves as a disincentive for property owners to participate in
these important affordable housing programs, particularly in
high-cost California. 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 members to obtain significantly more
expensive coverage from non-admitted insurers or terminate their
participation in the Voucher program. The viability of the
Housing Choice Voucher Program is entirely dependent on the
availability of housing in the private market.
ARGUMENTS IN OPPOSITION: According to the American Insurance
Association, AB 447 forces property insurers to provide coverage
of rental properties without the ability to properly evaluate
risk. Restrictions and limitations on underwriting adversely
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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. According to the
Association of California Insurance Companies, absent an
availability crisis, and with rates approved by the California
Department of Insurance, it seems inappropriate to place
restrictions on a company's underwriting ability.
ASSEMBLY FLOOR: 75-4, 6/4/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia,
Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley,
Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer,
Kim, Lackey, Linder, Lopez, Low, Maienschein, Mathis, Mayes,
McCarty, Medina, Melendez, Mullin, Nazarian, O'Donnell, Olsen,
Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas,
Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,
Waldron, Weber, Wilk, Williams, Wood, Atkins
NOES: Beth Gaines, Gallagher, Levine, Patterson
NO VOTE RECORDED: Obernolte
Prepared by:Erin Ryan / INS. / (916) 651-4110
8/20/15 16:20:41
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