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Quake Insurance Bill Stalls in State Senate

Legislature: Opponents call for making the measure more favorable to consumers.

July 12, 1996|KENNETH REICH | TIMES STAFF WRITER

SACRAMENTO — Efforts to pass a bill creating a state earthquake insurance authority stalled in the state Senate on Thursday as more than a dozen Democrats insisted on a more consumer-friendly bill.

The Senate voted 20-13 for the earthquake insurance measure just after noon, but it required a two-thirds majority--27 votes--to pass. After more than eight hours of negotiations, only one more vote had been obtained, and the measure was headed for another round of talks.

"This will intensify the debate for the next few weeks," said Sen. Tom Hayden (D-Santa Monica), "but it will leave the homeowners who can't buy either earthquake or homeowners coverage hanging in the meantime."

Among those voting no were Senate President Pro Tem Bill Lockyer (D-Hayward), the Democratic leader, and Herschel Rosenthal (D-Los Angeles), chairman of the Insurance Committee.

The proposed California Earthquake Authority would set rates, provide a uniform earthquake insurance policy for homeowners and oversee payouts for earthquake damage. Insurers still would sell the policies, but they would remit the premiums to the state.

Lockyer insisted on four major amendments to the bill. One would put the interests of policyholders over that of investors in the earthquake authority. A second would equalize rates across the state, removing a provision calling for higher rates in the Bay Area than in Los Angeles.

A third would disband the authority within 90 days if secondary mortgage holders ever tried to make earthquake insurance mandatory as a condition of getting a mortgage. And the last would tell policyholders they could drop their policies if the authority ever invoked a 20% surcharge on their premiums in case its resources were exhausted by a major quake.

There was no sign Thursday night that these amendments as a group would be accepted easily by proponents, particularly in the Republican-controlled Assembly and in the insurance industry.

Lockyer charged that as the bill stood, it represented "a bailout for the Big Three" companies selling homeowner and earthquake insurance, State Farm, Farmers and Allstate.

Rosenthal called the bill--approved 5-1 by an Assembly-Senate conference committee--"a bad deal for consumers" and said he saw a considerable danger that in a big quake the state agency would not have sufficient resources to pay all claims.

Championing the measure, Sen. Charles M. Calderon (D-Whittier), who chairs the conference committee, pleaded that although he knows the proposal is not perfect, it is the best solution now available to a state facing the refusal of many insurers to sell earthquake policies in the wake of the devastating Northridge quake.

Calderon said he could accept the amendments regarding the mortgage holders and the surcharges, but he indicated he would not accept the two others.

Although the bill could theoretically be reconsidered as early as next week, it appeared much more likely that the Consumers Union, a leading opponent of the bill, would get its way with its call for no vote until after the July 31 deadline for reporting the latest campaign contributions.

Its West Coast co-chairman, Harry Snyder, said he believes the insurers and other business and banking interests are contributing thousands of dollars to induce recalcitrant legislators to change their position.

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