BILL ANALYSIS �
AB 2589
Page 1
ASSEMBLY THIRD READING
AB 2589 (Bradford)
As Amended April 30, 2012
Majority vote
INSURANCE 12-0 APPROPRIATIONS 12-5
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|Ayes:|Hagman, Bradford, Charles |Ayes:|Fuentes, Blumenfield, |
| |Calderon, Carter, Feuer, | |Bradford, Charles |
| |Beth Gaines, Hayashi, | |Calderon, Campos, Davis, |
| |Miller, Olsen, Skinner, | |Gatto, Ammiano, Hill, |
| |Torres, Wieckowski | |Lara, Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
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SUMMARY : Requires the California Research Bureau (CRB) to
conduct a survey relating to underinsured motorist insurance
coverage (UIM) and report its findings to the Legislature.
Specifically, this bill :
1)Requires the CRB to survey other states and compare the key
elements of those states UIM laws with California law.
2)Requires the CRB to report its findings to the Legislature by
December 31, 2013.
3)Requires the CRB to include in its report to the Legislature a
discussion concerning the extent of disclosure to California
consumers about the operation of California's UIM as compared
to disclosures required by other states
EXISTING LAW :
1)Defines "underinsured motor vehicle" as a vehicle that is
insured for an amount that is less than the underinsured
motorist limits carried on the vehicle of the injured party.
2)Provides that the maximum liability of the insurer providing
UIM shall not exceed the policy limits less the amount paid to
the insured by any person or organization that is legally
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liable for the injury.
3)Provides that the insurer paying a claim pursuant to
underinsured motorist coverage is entitled to a setoff of
amounts received from or on behalf of the operator of the
underinsured motor vehicle.
4)Provides that uninsured motorist coverage and UIM must be sold
as one bundled coverage.
5)Provides that uninsured motorist coverage and UIM must be sold
in the same amount of coverage as the liability limits to any
purchaser of an automobile insurance policy, unless the
policyholder waives, in writing, the right to buy this
coverage.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, between $25,000 and $50,000 to the CRB to conduct the
research, and minor absorbable costs to the Department of
Insurance to consult with the CRB.
COMMENTS :
According to the author, who has been pursuing changes to the
way UIM works in California, it is necessary to develop
additional information about how this coverage works in other
states where consumers may have access to better coverage.
Rather than pursue the substantive changes previously proposed
by this bill, and by AB 1063 (Bradford) of 2011, it makes more
sense to gather better information before proceeding to seek
changes to the way UIM works in California (as described below).
There are three aspects of current law that operate to limit an
underinsured motorist claim in a manner that results in no
recovery, or a lower recovery, than might appear to be available
by merely looking at coverage limits as stated on a declarations
page of an automobile insurance policy. First, the definition
of an "underinsured motor vehicle" is a vehicle that is insured,
but the liability policy limits on the vehicle are less than the
underinsured motorist policy limits of the injured party. Thus,
if the two policy limits are the same, the at-fault vehicle is
not defined as an underinsured motor vehicle, and therefore
underinsured motorist coverage is not in play. Whether the two
vehicles' relevant coverage is both $15,000, or $100,000, or any
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other number that is the same, there is no underinsured motorist
claim at all.
Second, in a related but legally distinct provision, the insurer
that is providing first-party UIM is entitled to a setoff of
amounts its insured has received from or on behalf of an
underinsured motorist. For example, if that at-fault driver has
a minimum limits policy providing $15,000 of bodily injury
liability, and the injured party has underinsured motorist
coverage of $100,000, the injured party has a claim against his
or her own insurer pursuant to the underinsured motorist
coverage for any losses above $15,000, but subject to the
limits. However, the stated limits are subject to the setoff.
Thus, if the injured party had damages of $105,000, he or she
would recover the first $15,000 from the at fault party's
insurer, then $85,000 from his or her own insurer, but be out of
pocket for $5,000 because his or her own insurer is entitled to
a setoff of $15,000 that was actually received against the
stated policy limit of $100,000.
Third, there are circumstances where a policyholder who has
purchased UIM might not get up to the stated dollar amount, even
combining the at-fault party's payments with a set-off amount.
If, for instance, there are multiple parties injured in the
accident, it is possible that the coverage limit will have to be
divided among the several people, and a driver could end up with
less than the total of the $100,000 of protection they thought
they had purchased.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
FN: 0003986