Posts Tagged ‘insurers’

Auto insurance refunds? California’s Prop 103 may turn out to ban them

We’ve written before about the political genesis of California’s Proposition 103, a remarkably onerous and unreasonable set of controls on the insurance business:

After insurance companies were so rash as to support efforts to obtain liability reform through the initiative process, trial lawyers struck back in 1988 with the rate-slashing Proposition 103, which inflicted huge losses on the industry.

Now, in the wake of drastic declines in miles driven as a result of the COVID-19 emergency, many of the biggest national auto insurers have announced voluntary programs to refund a portion of premiums to motorists, as a goodwill gesture reflecting in part the expectation that claims payouts will be much lower than anticipated. Those checks will come in handy for consumers in most states, but there’s a problem in California: any refunds, even those voluntarily embraced by insurers, appear to violate the terms of Prop 103. Ray Lehmann explains at Insurance Journal. He concludes:

The result is absurd. It’s a bug in the text. But because it was passed by the people of California as a ballot proposition, these sorts of bugs can’t simply be fixed by the Legislature. Any changes to the law require two-thirds majorities in both chambers, and even then, they must be found to “substantially further” the goal of the proposition.

It is yet another example of ways that the structures of Prop 103, well-intended though they may be, have come to be a straitjacket on both insurers and their customers.

In other insurance news, a few days ago I wrote about business-interruption insurance, blasting interest groups that want insurers to have to pay out despite policy exclusions. Now President Donald Trump has weighed in about how businesses supposedly should be able to recover losses for pandemic interruption, policy language or no.

He’s wrong. As I wrote Monday. “This category of risk has been widely grasped for many years… pandemic-related business interruption coverage [was] neither promised nor paid for at the time.” Seven Republican Senators, including Tim Scott (R-S.C.) and Ben Sasse (R-Neb.) have signed a well-informed letter opposing the idea.

Yes, the situation is tough on a dozen business sectors, starting with restaurants and travel. But there’s no way they should be allowed to raid insurance coffers of reserves needed to pay countless other claims whose coverage *was* promised and paid for in premiums. And if we let them get away with that kind of raid, no insurer will ever be able to count on the language of a contract again. Guess what’ll happen to rates when they realize they need to cover that kind of unpredictable future risk?

Insurance that was written to cover pandemics, and insurance that wasn’t

What’s the worst single insurance-law idea you could bring to bear on the COVID-19 outbreak? How about passing a law to require insurers to cover pandemic-related business interruption even if their policies explicitly named and excluded coverage of that risk? My new post at Cato criticizes bills afoot in the Ohio, New Jersey, Massachusetts, and New York legislatures: “The fact that this category of risk has been widely grasped for many years is among the reasons why state legislatures should absolutely not be permitted to enact legislation retroactively rewriting insurance contracts to mandate pandemic-related business interruption coverage neither promised nor paid for at the time.”

March 11 roundup

  • Slightly afield from law, but good watching: Yale’s Nicholas Christakis speaks at Cato on his new book Blueprint: The Evolutionary Origins of a Good Society [Cato Forum]
  • Tech platform regulation: “The ‘EARN IT’ Act Is Another Terrible Proposal to ‘Reform’ Section 230” [Eric Goldman and more] “Why Does The NY Times Seem Literally Incapable Of Reporting Accurately On Section 230?” [Mike Masnick, TechDirt]
  • Author of new book, a Fordham lawprof, “wants the U.S. Supreme Court (and other federal courts) to enforce international law standards against backward American states and localities.” It’s a no-go, says Jeremy Rabkin [Law and Liberty reviewing Martin Flaherty, Restoring the Global Judiciary]
  • Police transparency, Annie E. Casey Foundation, county liquor stores and bicycle licenses in Montgomery County, and more in my new Maryland policy roundup [Free State Notes]
  • Yikes: former BigLaw partner who specialized in product liability subrogation claims sentenced to five years on charges of defrauding almost $3.5 million from insurers, manufacturers and others [Judy Greenwald, Business Insurance]
  • Somehow missed this in 2018: Texas lawyer disbarred for barratry is re-elected while in jail [Lowering the Bar]

ACLU: don’t let New York regulators squelch NRA’s First Amendment rights

I’ve been critical of the ACLU lately but its amicus-brief defense of the NRA’s First Amendment rights against New York Gov. Andrew Cuomo’s strong-arm use of insurance and bank regulation is vital, timely, and right:

Public officials are, of course, free to criticize groups with which they disagree. But they cannot use their regulatory authority to penalize advocacy groups by threatening companies that do business with those groups. And here the state has admitted, in its own words, that it focused on the NRA and other groups not because of any illegal conduct, but because they engage in “gun promotion” — in other words, because they advocate a lawful activity.

Substitute Planned Parenthood or the Communist Party for the NRA, and the point is clear. If Cuomo can do this to the NRA, then conservative governors could have their financial regulators threaten banks and financial institutions that do business with any other group whose political views the governor opposes. The First Amendment bars state officials from using their regulatory power to penalize groups merely because they promote disapproved ideas.

My post from May on the topic is here. More on the ACLU brief: Dan M. Clark, New York Law Journal; Declan McCullagh.

“When It Comes To Police Reform, Insurance Companies May Play A Role”

To what extent can insurance companies, which seek to minimize payouts for official misconduct, play a constructive role in police reform? “One of the first things I found was this pamphlet from Travelers Insurance about how to do a strip search, and I just thought people in my world have no idea that this stuff is out there and it’s really fascinating,” says University of Chicago assistant law professor John Rappaport, who “says he spent years studying police reform before it dawned on him to ask” what role insurance companies might play. After-the-fact review of use-of-force incidents and training of officers are among existing roles for some insurers. One factor, according to Joanna Schwartz of UCLA: the private companies are relatively free from “the political counterforces that could prevent the city council or mayor from pushing hard on a law enforcement agency to reform.” [NPR] Much more: Radley Balko.

Banking and finance roundup

Environment roundup

March 9 roundup

  • Roundup of James Q. Wilson appreciations [Michael Greve] The controversial book a 29-year-old Wilson never wrote [Helen Rittelmeyer]
  • “Secret Class Action Settlements” [Rhonda Wasserman (Pitt), SSRN, via Stier] “Classic scholarship: Class action cops” [Trask/Class Strategist] Where should class-action scholarship go next? [same, more]
  • So does this mean GOP’s overturn-Kelo bill would kill the Keystone pipeline? [Stoll]
  • Stossel on illegal lemonade stands and vague laws that make everyone guilty; guest star is Cato’s Harvey Silverglate [YouTube]
  • No Fluke? Linda Greenhouse’s recollection of Lilly Ledbetter case is fairly fictionalized [Ed Whelan, earlier]
  • Footsie with plaintiff-lawyer adversaries: “Allstate vs. former Allstate adjuster” [Ron Miller]
  • Benjamin Barton reviews the Winston-Crandall deregulate-lawyers book [MSLR/SSRN via Instapundit, earlier]