State Insurance Chief Asks Mandatory Liability Plan

The state insurance commissioner said Thursday that while four companies have informed his office that they intend to renew sales of liability coverage to California cities as a result of the passage of Proposition 51, two others say that they will not and a number of others have been noncommittal.

As a result of the reluctance of these “very unresponsive” companies to commit themselves to reenter the market, said Bruce Bunner, he wants the Legislature to quickly give him authority to establish an assigned-risk plan for liability insurance and to compel, if necessary, the companies wishing to do business in California to participate in it.

Bunner said at a Los Angeles news conference: “The impact is significant enough from (Proposition) 51 (in terms of reducing insurance company losses) that there is no excuse for the companies not to come back into the market.”

There are now 57 California cities going without liability insurance coverage and 150 more are in self-insuring pools, according to Victoria Clark, a spokeswoman for the League of California Cities.

Telephone inquiries to the four companies that the insurance commissioner named as being willing to resume selling municipal liability policies--TransAmerica, Cigna, Firemen’s Fund and Aetna--showed that their commitments, if any, were limited. None of the companies have ever been big municipal sellers.

Bunner said that a bill on insurance availability by state Sen. Alan Robbins (D-Van Nuys), which has passed the state Senate and is now before the Assembly Insurance Committee, should be amended to give him the special new authority he wants.

Under assigned-risk plans, a party that cannot buy insurance on the regular market is assigned by a central authority to a company that then must sell it a policy. Usually, the rates for assigned risks are higher than for regular insurance policies. Creation of an assigned-risk plan for municipalities and other liability buyers, for example, would guarantee that none of them would be forced to go without coverage.

The first response to Bunner’s call for legislative action to allow him to compel companies to write insurance was rather iffy. Bunner’s own boss, Gov. George Deukmejian, held back any commitment, and Robbins said he wants more details before agreeing to amend his bill.

Deukmejian’s deputy press secretary, Kevin Brett, said: “The governor presently is reviewing several options, including Commissioner Bunner’s proposal. But the governor at this time has not endorsed any specific proposal. He will be making his position known in coming weeks.”

Robbins said he wants to confer with Bunner to be sure that he was talking about compelling the companies to sell all types of commercial liability insurance, not just that to municipalities and other levels of government, before amending his bill. “We have been after the commissioner for some time to take a more activist role,” he said.

Bunner seemed in an activist mood Thursday, remarking to a reporter after his news conference:

“The question in the long run is whether we’re going to have a free market system in insurance in California. We want one. But if it doesn’t work, pretty soon we’re not going to have one.” The implication was that he believes that there is certain to be a step-up of government control over the system if the insurance industry does not become more willing to offer liability coverage to cities.

The insurance commissioner opened the news conference by saying that his chief deputy, Roxane Gillespie, had called a number of companies Wednesday to see what their sales policies would be to municipalities in light of the passage of Proposition 51, the initiative that could reduce some categories of damage awards in personal injury lawsuits.

He said that Gillespie had been given positive responses by Trans-America, Cigna, Firemen’s Fund and Aetna, but that officials of the Chubb and Royal companies had told her that they will not reenter the municipality liability field and that executives of other companies, which Bunner did not name, had been noncommittal.

Bunner passed out the names and telephone numbers of officials at the companies he said had responded affirmatively.

However, calls later to those companies found mostly a hesitant response.

A spokesman for Aetna, for example, said, “We’re not going to comment at all on this.”

A spokesman for TransAmerica, Michael Johnson, said that Trans-America, which has been out of the municipal liability business in California for a year, was never a big seller of such insurance, and all it is saying now is that it is willing to consider writing new policies. “We will not write any and every city,” he said.

A Firemen’s Fund spokeswoman said that her company, too, was in the business in the past “only to a very small extent” and is not committing itself now to selling any more such insurance than it ever did in the past. She said, however, that it will not limit itself “to selling just one token policy.”

Barry Wiksten, senior vice president for public affairs at Cigna, was the most responsive of the officials reached.

He said Cigna has decided to abandon plans not to renew the policies of five California cities carrying liability policies with the company now. He said that in the wake of the passage of Proposition 51, it will renew those policies and is prepared to sell others as long as they meet certain risk criteria. “We think (Proposition) 51 will help insureds, but just how much we can’t say at this time,” he said.

Bunner said that he is asking his chief of consumer affairs, Everett Brookhart, to “closely monitor” company willingness to make municipal liability sales and report to him on a monthly basis, or even more often if merited.

“I am convinced that if the voluntary market is not working, we need some authority to intervene,” the insurance commissioner said.

Asked whether he sees a danger of a public furor if insurance availability and pricing do not improve in the wake of the passage of Proposition 51, Bunner replied:

“I wouldn’t call it a danger. Very clearly, if prices are totally out of line, and companies are making exorbitant profits, the public has a legitimate reason to complain.”