Barry P. Goldberg mourns the death of California Assembly Bill AB 862. It was sent to the Insurance Committee where all consumer-oriented insurance legislation goes to die a silent and quiet death by operation of law. If a Bill does not come out of that ineffectual committee, it is deemed "dead" unless re-introduced sometime later. That Bill was a logical first step in empowering responsible California motorists to be able to adequately insure themselves against the epidemic of uninsured and underinsured drivers in the State of California. In short, the Bill would have allowed California motorists to purchase "enhanced" Underinsured Motorist Coverage which would have actually and predictably protected them and their family when involved in an accident wherein the adverse driver did not have sufficient liability insurance.
Currently, California consumers buy uninsured motorist coverage with the mistaken belief that they are fully protected by the amount of insurance they buy if they are hit by another driver who is either uninsured or has inadequate liability insurance coverage. Under existing law, the value of the insurance purchased is often eliminated or substantially reduced at no fault of the policy holder in the form of a "credit."
The California Uninsured/Underinsured Motorist Statute, Insurance Code §11580.2, allows an insurer to deduct the amount of the liability insurance available to the at fault driver from the amount of uninsured motorist coverage in order to establish the amount of "underinsurance" available to the injured policy holder. This "credit" or "set off" often has the undesirable effect of eliminating the underinsured insurance benefit all together, even if the value of the policy holder's injuries substantially exceeds the extent of the at fault driver's liability limits. Moreover, the statute as written and interpreted by the case law may create an unfair anomaly eliminating the uninsured insurance benefit based upon the happenstance of multiple non- at fault claimants.
Because California's statutory minimum liability coverage ($15,000/$30,000/$5,000)is the lowest in the nation and has not been raised or supplemented since established in 1974, it is estimated that about 50% of all accidents in California are "underinsured"---meaning that there is not enough liability coverage to compensate California motorists for accidents that were not their fault.
This latest "ill-fated" Bill AB 862 followed on the heels of AB 1063, introduced in 2011, which would have simply eliminated the "credit" or "set off" and with it, all of the undesirable consequences. That Bill was also effectively "killed" in the Insurance Committee by the insurance industry.
The fact that the insurance industry opposes any Bill which is both objectively fair and for which they can charge increased premiums should raise some red flags for even the most casual observer. Why would insurers not want to sell additional insurance coverage for additional premiums?
The answer should be obvious----insurers like the current inadequate coverage scheme and are making record profits by having Californians drive around "underinsured." Insurers like the current "credit" or "set off" and enjoy the profit of selling an Uninsured Motorist Policy for a certain amount, and then possibly walking away or reducing that amount based on the happenstance of who caused the accident.