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CA Department of Insurance

Attorney General defends Insurance Commissioner’s regulation in State Supreme Court case

News: 2016 Press Release

For Release: November 2, 2016
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Attorney General defends Insurance Commissioner’s regulation in State Supreme Court case
Insurance industry lawsuit seeks to reduce homeowner insurance coverage protections
SACRAMENTO, Calif. — The California Supreme Court heard oral arguments yesterday, as the Attorney General's Office defended the insurance commissioner's homeowner insurance consumer-protection regulation against a suit filed by the insurance industry challenging the regulation.

The consumer-protection regulation was developed under Commissioner Steve Poizner (R) and issued by Commissioner Dave Jones (D) to address the problem faced by homeowners, whose homes were damaged or destroyed in the Oakland Hills and other fires, after discovering they were underinsured because the replacement cost estimates from their insurers left out key elements of the cost to rebuild their homes. In an attempt to offer artificially low premiums and compete unfairly for business, insurers removed certain elements of the actual estimated-replacement, which left homeowners without sufficient coverage to rebuild their homes.

The regulation is an important consumer-protection regulation in effect since it was issued in 2011. The regulation requires home insurers, when providing a replacement-cost estimate, to provide a complete estimate of the cost of replacing a home so homeowners know how much insurance they should buy. Insurers sued the commissioner to block the regulation.

"Yesterday the Attorney General's office presented a strong defense before the California Supreme Court that our consumer-protection regulations are lawful," said Commissioner Jones. "The Attorney General's office noted that the Department of Insurance is expressly authorized to issue regulations to protect consumers, and this regulation falls within that express authority as well as within the authority of a long line of cases supporting rulemaking by governmental agencies like the California Department of Insurance. We look forward to the decision of the California Supreme Court. At the end of the day, this is about making sure that people are able to rebuild their homes with the replacement-cost insurance that they bought, after they fall victim to a devastating fire."

This lawsuit is yet another example where insurers want to block an important consumer-protection regulation and seek to limit the ability of the Insurance Commissioner to protect consumers.

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Media Notes:

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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