A recent California legal case shines light on a fact that will surprise many, but not me:  California's Insurance Commissioner, considered by many to be the most diligent consumer advocate among the 50 state's regulators - does not as a matter of course, review, approve or disapprove the wording in disability (or home, or business) insurance policies before they are sold to the public.  

The California Court of Appeal recently ruled:  "Well he should"  The case, Ellena v. Standard Insurance Company, California Department of Insurance et al, California Northern District Court, Case No. 3:12-cv-05401-SC  was brought by UP sponsor Bennett Cohen on behalf of a woman whose insurer failed to pay benefits after she became severely disabled and unable to work due to lupus. The California Department of Insurance, (CDI) defended itself in the suit, and are now saying the agency doesn't have enough people on staff to handle this responsibility.  That is probably true, but the solution is not to let the fox guard the henhouse.  The solution is to get a bigger budget and hire qualified guards.  See it here.

But I already knew CDI isn't reviewing policy language on a regular basis.  Several years ago I initiated a meeting with several high-level CDI personnel to seek the agency's disapproval of the growing list of unfair exclusions in home policies for water damage and mold.  I was shocked to learn that the CDI has to take insurers' word about changes in home insurance policy language, and that it rarely if ever analyzes new language to determine how it will impact coverage and claims.  CDI staff cited staff reductions during the Poizner administration and limited resources as the reason. (Not to mention the fact that CDI is regularly fighting off lawsuits from insurers every time they try and do their job...) I hadn't given up on this initiative, it's just one of many competing priorities.

But let's hope the Ellena decision, a very important victory for consumers, will help the Commissioner get the resources from the Legislature to comply with the Court decision and step up to the task of better protecting consumers by routinely reviewing, (approving and disapproving where needed), the wording in insurance policies sold to California residents.  Not just disability.  Home and business policies as well. We need and are entitled to that protection...


About The Blogger

Amy Bach

Amy Bach has been a professional advocate for insurance policyholders since 1984 and an attorney since 1989. While practicing insurance regulatory law and representing clients in litigation matters, she co-founded United Policyholders in 1991. Bach migrated from the private practice of law in 2005 to become the organization's full-time Executive Director and primary spokesperson; shaping and overseeing the Roadmap to Recovery™, Roadmap to Preparedness, and Advocacy and Action programs. She is a nationally-recognized expert on insurance claim and legal matters; frequently interviewed in print and broadcast media, and the author of numerous legal and consumer publications including "The Disaster Recovery Handbook," "WISE UP: The Savvy Consumer's Guide to Buying Insurance," and tips and guides in the UP Claim Help Library.  Recognized by Money Magazine as a Money Hero, Bach has served as an official consumer representative to the National Association of Insurance Commissioners since 2009 and is in her second term as an appointed member of the Federal Advisory Committee on Insurance. She also currently serves on the American Bar Association’s Standing Committee on Disaster Preparedness and Response.