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California Wildfires - Who Really Gets Burnt? Follow The Money - Part 3

Saturday, January 17th, 2009

The October 2003 wildfires, which swept huge areas from Ventura County to the Mexican border, damaged or destroyed 3,631 buildings and were blamed for 24 deaths. Although some insurers won accolades for their response, the state insurance department received 869 complaints concerning insurers  ” roughly one for every four lost houses.  

Garamendi and a number of legislators held public hearings in Southern California and fashioned legislative solutions to recurring complaints. Insurers said the survivors’ stories were not symptoms of larger problems and most claims were resolved with minimal dispute. 

“A great many of these issues were brought up based on anecdotes,” said Bill Sirola, a spokesman for State Farm who is based in Sacramento. “Sometimes in the emotional aftermath of disasters, like the fires down in the Southland, there’s a great amount of publicity to what has seemingly gone wrong without seeing that, by and large, everything has gone well.”

State Sen. Martha Escutia (D-Whittier) introduced a measure in 2004 to prohibit insurers from canceling a policy or raising its cost because a home had suffered damage from a natural disaster or something beyond the owners’ responsibility or control.

Among the homeowners who testified was Lisza Pontes. Her Lakeside house was damaged but was spared destruction largely because she had spent more than $50,000 on fire-resistant coating and brush clearance.
“Mine was the only house on a street of 13 that wasn’t a complete loss,” she said. Nonetheless, after Pontes filed a claim, her insurer placed her in a more expensive, high-risk pool, and 17 other California companies rejected her before she found an out-of-state firm that would insure her.

Industry officials argued that it was reasonable to be skeptical of people with a history of filing claims, because they are more likely to file future claims. State regulators and consumer advocates countered that insurers practice “use it and lose it” to deter people from filing claims. Six members of the Assembly Insurance Committee voted for Escutia’s measure, SB 1474. Three opposed it. Nine votes were needed to pass the bill.

Under Sacramento rules, a measure needs the support of a majority of a committee’s members  ” not just a majority of those casting votes. The panel at that time had 17 members. Escutia’s bill failed because eight did not vote, though attendance records show that all were present in the Assembly that day. In 2005, a scarcity of participants in Vargas’ committee killed another bill concerning homeowners insurance.

Sen. Deborah Ortiz (D-Sacramento) had proposed banning insurers from using potential customers’ credit histories in deciding whether to sell them policies. Ortiz said consumers’ credit was irrelevant to whether they were likely to file insurance claims. The industry countered that its studies showed that people who fell behind on their credit were more likely to fail to take care of their homes.

When the measure, SB 603, came before Vargas’ committee, which had been reorganized into a 10-member panel, three legislators cast votes for the bill, and two against it. The bill failed because five other legislators, including Vargas, did not vote, though all were in the Capitol that day.

As do many other interest groups, companies that write homeowners insurance have multiple ways of currying favor with legislators. Disclosure records show that since 2003, property insurers have picked up the tab 70 times on items as small as a $3.72 breakfast and as large as a $340 round of golf at Pebble Beach.

“That’s our premium dollars working against us,” said George Kehrer, executive director of Community Assisting Recovery, an advocacy group founded after the 1994 Northridge earthquake. In the last three years, Allstate, Farmers Insurance Group and two industry associations gave committee member Ronald S. Calderon (D-Montebello) $1,300 in golf fees, meals and a room at the Wynn Hotel in Las Vegas. Allstate also paid for a $170 meal at a Pebble Beach clubhouse for Calderon and his wife.

In May 2003, Farmers paid for Calderon and then-committee member George Nakano (D-Torrance) to attend a Laker game at $114 per ticket. State Farm gave $50 tickets to a 2004 Clipper game to staffers who work for Nakano and for two colleagues on the panel, Mark Ridley-Thomas (D-Los Angeles) and Jerome Horton (D-Inglewood).

In March 2005, Farmers bought dinner for Assembly Speaker Fabian Nuñez (D-Los Angeles), Vargas and the committee’s chief advisor at a cost of $166 a person. Insurers do not overlook the Republican minority on the panel, though records show that they have tended to pay for smaller events, like a $32 reception in 2003 for Dave Cox (R-Fair Oaks), who owns an insurance business (Cox was elected to the Senate last year). Committee vice chairman John Benoit (R-Palm Desert) received a $67 dinner in 2004.

One of the most active lobbying groups is the Personal Insurance Federation of California, formed by Farmers and State Farm in 1989 after voters imposed stringent new rules on insurers through Proposition 103.

Between 2003 and 2005, the federation paid for 22 meals for committee members and their aides, as well as a $290 golf game for Vargas’ brother, Javier. A frequent participant at those meetings, legislators said, was the federation’s president, Dan Dunmoyer, now a deputy chief of staff to Gov. Arnold Schwarzenegger.

Vargas said the perks were irrelevant. “Most of the contact I have is not with them,” he said. “Most of the time I’m meeting with citizens, I’m meeting with friends of mine, and these are people who are not in the insurance business.”

Vargas noted that since he became chairman of the committee, he has sponsored three bills opposed by insurers and often votes against their interests.

Several of the wildfire survivors said Vargas particularly disappointed them. “When we found out that the chairman of the insurance committee was a San Diegan, we thought: ‘How great, who better than a local guy to know what had happened,’ ” said Ciaran Thornton, who lost his Harbison Canyon house in the fires. Thornton and a friend whose home had narrowly escaped incineration met with Vargas at his Chula Vista office in June 2004.

“We sat down, he listened to us. He said, ‘We’ll see what we can do.’ It was very hard convincing him. It was pretty much a roadblock,” Thornton said. “He never got back to us at all.”

Vargas said he gave wildfire victims extensive opportunities to make their cases, both privately and before his panel. But he said his empathy was outweighed by concerns that greater protections for wildfire areas, which tend to be affluent, would be paid for by more economically vulnerable people.

“You know who’s going to get hurt? It’s the elderly woman who has never had a claim, never done anything wrong, and her rates are going to go up by 10%, and that’s not right,” Vargas said.

Amy Bach, executive director of United Policy Holders, a San Francisco homeowner advocacy group, said the schmoozing between legislators and lobbyists cements personal relationships that carry over into the Capitol.

“If the guy’s gotten them a great tee time on a very coveted golf course, then they’re pals, and that makes it that much harder on a personal level to go against them,” she said.

See which California lawmakers, that represent you, make the biggest bucks from the insurance industry in Part 4.

Source: Times reporting
Los Angeles Times

See the article on Los Angeles Times website

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