BILL ANALYSIS �
AB 1524
Page 1
Date of Hearing: March 19, 2012
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 1524 (Allen) - As Introduced: January 19, 2012
SUBJECT : Commercial carriers: hot air balloons
SUMMARY : Eliminates the sunset date for the exemption for
commercial balloon operators from regulation by the California
Public Utilities Commission (CPUC) and extends, indefinitely,
the requirements for insurance coverage and local notifications
that are set to expire on January
1, 2013.
EXISTING LAW :
1)Exempts, until January 1, 2013, commercial balloon operators
from regulation by the CPUC and requires commercial balloon
operators to maintain a minimum of $1 million of liability
insurance for a balloon carrying up to 10 passengers, with
additional liability coverage of $100,000 for every additional
passenger.
2)Requires, until January 1, 2013, a commercial balloon operator
to display their business license only within the city or
county that is the person's primary place of business
frequented by customers and potential customers.
3)Imposes, until January 1, 2013, a state-mandated local program
by requiring local governments to give reasonable notice of
the evidence of insurance coverage requirement with any
business license renewal notification and to maintain as a
public record every business license issued by the local
government to a person providing transportation by hot air
balloon for hire. A local government is authorized to charge
a reasonable fee for purposes of carrying out these
provisions.
4)Excludes from the definition of "commercial air operator" a
person furnishing or providing transportation by hot air
balloon for hire and excludes from the definition of
"aircraft" a hot air balloon.
5)Requires the CPUC to require every commercial air operator, as
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defined, to procure, and continue in effect, adequate
protection against liability for personal bodily injuries and
property damage as a result of an accident, that may be
imposed by law upon the operator and upon any person using,
operating, or renting an aircraft, as defined, with the
permission of the operator.
6)Makes it a misdemeanor to fail to obtain and maintain a
current valid local business license as required or to fail to
maintain insurance as required.
FISCAL EFFECT : Unknown
COMMENTS : Before 2005, commercial operators of hot air
balloons, who primarily provide sightseeing rides for tourists,
were regulated by the CPUC as commercial air operators. Because
they were lumped in with other commercial air operators such as
small aircraft engaged in cargo, charter, and sightseeing
services, these hot air balloon operators were subject to
increasingly expensive and limited liability insurance
requirements. As a result of the standards established by the
CPUC, insurers withdrew from the hot air balloon liability
insurance market, offered coverage that did not meet the
criteria set under the rules, or offered insurance coverage that
was cost prohibitive for the business.
According to the author, "From 2000-2004, the number of
insurance companies providing hot air balloon insurance dwindled
from several to two, primarily due to the events of September
11, 2001, and poor performance of insurance companies'
portfolios. In 2004, balloon operators expressed concerns about
the ballooning cost of liability insurance, the lack of
availability of such insurance, and frustration with the
regulatory mechanisms of the CPUC. They contended that
California was the only state to establish minimum liability
requirements for commercial ballooning and that California had
the lowest accident rate among the major ballooning states."
Also, Susan Kennedy, CPUC commissioner, expressed in a letter
dated April, 2004, to the CPUC that the CPUC has absolutely no
business regulating hot air balloons as they are not true
transportation and that some other state agency, not the CPUC,
should ensure that hot air balloon operators maintain an
appropriate level of insurance.
Responding to the concern of the CPUC-regulated hot air balloon
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industry, AB 2430 (Wiggins), Chapter 881, Statutes of 2004, with
the support of the CPUC, was enacted that removed commercial
balloon operators from CPUC's jurisdiction, as well as
established minimum insurance requirements, required
notification to passengers of the operator's liability coverage,
and required proof of coverage to the local government entity
granting the ballooning company a business license. These
changes were made effective for four years to allow experience
with the new rules.
Subsequently, as the provisions of AB 2430 were set to expire on
January 1, 2009, legislation was enacted, SB 911 (Wiggins),
Chapter 706, Statutes of 2008, that extended from January 1,
2009, to January 1, 2013, the sunset dates on provisions
regulating commercial balloon operators and the minimum
liability insurance and noticing requirements.
To contend with the impending sunset date, this bill removes the
January 1, 2013, sunset date and extends, indefinitely, the
exemption for commercial balloon operators from the jurisdiction
of the CPUC as well as other insurance and local notification
requirements. The author contends that "the Legislature removed
hot air balloon operators from the CPUC's jurisdiction on a
temporary basis in 2004 and again in 2008. To date, the CPUC
has reported no negative consequences caused by the shift from
state to local regulation. AB 1524 will permanently remove the
hot air balloon industry from the CPUC's jurisdiction and
protect small businesses owners from any future unnecessary and
cost prohibitive regulations."
Affected Industry : According to the author's office, there are
approximately 30-50 companies in California offering hot air
balloon rides, almost all for compensation. These companies are
located throughout California operating in the Napa and Sonoma
Valleys, the Palm Springs/Palm Desert area, Los Angeles/Ventura,
and the San Diego areas. Additionally, since 2005, as several
new insurance companies started offering liability insurance for
commercial operators of hot air balloons, the price of this
insurance has declined, and the industry's overall safety record
has not significantly changed. Further, the author's office
indicates that, since 2008, there have only been a few accidents
with none resulting in fatalities.
Arguments in Support of the bill : Writing in support of this
bill, the CPUC contends that "The Legislature removed hot air
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balloonists from the CPUC's oversight in 2004 after the industry
made a convincing argument that the CPUC's insurance
requirements for "aircraft" were not appropriate to hot air
balloons. Since that time, cities and counties have had the
authority to require balloonists operating in their jurisdiction
to obtain a business license and to provide evidence of not less
than $1,000,000 in liability insurance coverage. The CPUC's
Consumer Protection and Safety Division (CPSD) is not aware of
any negative consequences to the public caused by the shift from
state to local regulation. Moreover, CPSD believes that local
authorities are in a better position to enforce the insurance
requirements."
Previous legislation : AB 2430 (Wiggins), Chapter 881, Statutes
of 2004, removed commercial balloon operators from CPUC's
jurisdiction and established minimum insurance and local
notification requirements.
SB 911 (Wiggins), Chapter 706, Statutes of 2008, extended the
provisions of AB 2430 that were to sunset on January 1, 2009, to
January 1, 2013.
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Utilities Commission
Napa Valley Aloft, Inc.
Napa Valley Balloons, Inc.
Opposition
None on file
Analysis Prepared by : Ed Imai / TRANS. / (916) 319-2093