BILL ANALYSIS �
AB 2406
Page 1
Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 2406 (Buchanan) - As Amended: April 9, 2012
SUBJECT : Property and casualty insurance rates: interveners
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
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
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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 issue of "substantial
contribution" which entitles the intervener to compensation is
determined at the end of the proceedings.
FISCAL EFFECT : Undetermined but minor costs to the DOI to post
the information required by the bill on the DOI Internet Web
site.
COMMENTS :
1)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.
2)Legislative Counsel's technical amendments . The bill's
primary provisions discussed above propose a new subdivision
to be added to an existing Insurance Code section. In
addition, Legislative Counsel has made some standard
nonsubstantive amendments to other existing subdivisions in
that same section to conform terminology to California's
standard statutory usage. Because Legislative Counsel has
tagged the bill majority vote (see Comment 3, below), it would
appear that Counsel is affirmatively asserting that these
amendments do not constitute a substantive change to the
effect of the initiative statute. Nonetheless, Consumer
Watchdog has expressed opposition to these amendments based on
the fear that an insurance company could seize upon the
amendments to limit potential future lawsuits challenging
insurer behavior. Since these amendments do not relate to the
policy issue raised by the bill, the author may wish to
consider returning the nonsubstantive changes to the exact
terminology used in the initiative statute.
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3)Majority vote vs. 2/3 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 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 2
requirements: first, the Legislative amendment to the
initiative statute must be passed by a 2/3 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 2/3 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 2/3 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
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sections adopted by Proposition 103 necessarily constitute an
amendment to the initiative statute, requiring compliance with
the initiative's 2 restrictions on Legislative amendments.
4)Technical amendment . One subdivision of the Insurance Code
section that the bill is amending has previously been declared
unconstitutional by the California Supreme Court. Because
those provisions have no effect, it may make sense to strike
the language from the statute to avoid confusion to the public
that may not be aware of the determination that the provisions
are unconstitutional.
REGISTERED SUPPORT / OPPOSITION :
Support
Association of California Insurance Companies.
Personal Insurance Federation of California
Opposition
None received
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086