Senate Standing Committee on Insurance

Yes, ma'am, I would. Thank you. To the rescue, Senator Richardson. She's right. Thank you, Senator. Welcome. The committee will come to order, and at this time, we will establish a quorum. Committee Assistant, we'll call the roll.

[Roll Call]

Thank you. We have a quorum. Welcome again. Thank you for your patience. The docket today consists of nine file items, one of which is on consent. The first three items are composing a special order of business.

We will take those first. File Item Number One, SB 1209, Senator Allen, followed by File Item Three, SB 1301, Senator Allen. Oh, I know that he was here a moment ago. Welcome, Senator. Welcome, Commissioner Lara. Senator, file items one and three.

Proceed when you're ready.

Well, thank you so much, Mister Chair, and thank you so much, Members. So, current law allows the insurance commissioner to conduct examinations of insurers to evaluate their market practices to verify that insurers operate fairly and in compliance with state law. These examinations may identify operational deficiencies and include findings and recommendations designed to protect consumers and improve company practices.

The exams are intended to propose actions to remediate any violations of the law or to improve the financial health of an insurer to avoid potential default and risk to policyholders. Now, while most insurers voluntarily comply with actions proposed in the report, there's not a clear mechanism to require remediation of violations that are found.

Current law does not provide a mechanism for an immediate form of enforcement to encourage proactive efforts to prevent violations from repeating in the future. So this bill would allow the insurance commissioner to assess a fine to an insurer for failing to address corrective actions proposed in an examination. The proposed actions would need to be adopted within a time frame agreed upon between the commissioner and the insurer.

The bill also establishes a formal process for the commissioner to call the insurer to a hearing to discuss the violations, for the commissioner to determine whether an enforcement action is necessary. An insurer would also be able to appeal a decision by the commissioner, including to a court of law, just like with any other determination under the Administrative Procedures Act.

And then the goal of the bill is to ensure that those few bad actors who've been found to repeatedly violate the law are taking proactive steps to improve their practices and avoid future violations that harm policyholders and, quite frankly, harm the health of the entire industry. I want to thank the committee staff for their hard work on this bill. I want to thank the industry for constructive conversations, including the one that we just had outside, and I think we're in a very, very good place.

We are very committed. I'm feeling really good about where things are right now. We're certainly committed to working closely with them to address concerns, get the bill to a good place. But testifying in support of the bill this afternoon is our sponsor, Insurance Commissioner Ricardo Lara, with Tony Cignarale and Laura Clements to help answer technical questions.

Welcome, Commissioner. My understanding is your request of your office is that your two deputies will each consume a minute each at a time. Yes, sir. Welcome.

Thank you. Thank you, Mister Chair. You know, in this environment, the Department of Insurance must have accurate, timely, and complete financial information from insurers and from the FAIR Plan to monitor risk and protect consumers. But today, a serious void exists in our examination enforcement authority. The core problem here is every year my department conducts financial solvency exams, market conduct exams, and claims handling reviews.

These examinations routinely uncover violations of statutes and regulations, improper claims practices, inaccurate financial reporting, failures to safeguard assets, systemic issues that, if uncorrected, put consumers at risk. Yet under current law, insurers are not required to implement corrective actions within any time frame or at all. This means harmful practices can continue for years. Solvency risk can go unaddressed, and consumers remain exposed to repeat violations. And when insurers refuse to fix identified problems, CDI has no direct enforcement mechanism to compel compliance.

This gap is especially dangerous in a market as complex and fast moving as California's. After major catastrophes, misinformation spreads quickly about insurer solvency, FAIR Plan exposure, and market withdrawals. In these moments, I need accurate, verifiable data, not anecdotes, not misreported news stories, not rumors, to evaluate the financial condition of insurers and the FAIR Plan. When real data is missing, misinformation fills the gap, creating confusion, unnecessary alarm, and policy proposals that don't match the actual problem.

SB 1209 ensures CDI has the authority to obtain the financial information and documentation needed to assess solvency and intervene early before problems escalate.

And it ensures that companies follow through on the corrective actions they agreed to during the market conduct and financial examination process. This bill is essentially sponsored by the two deputy commissioners before you who oversee the most consequential oversight functions in my department. But please don't tell my other deputy commissioners. First, Laura Clements, deputy commissioner of the Financial Surveillance Branch. Her team monitors the solvency and financial health of every domestic insurer in California.

Yes, including the FAIR Plan. When I hear rumors or speculation about the FAIR Plan or an insurer's financial condition, before I respond to your calls or your text, Laura is the first person I call. After every major wildfire, we are in constant communication with her team to ensure we have real data on insurer solvency and are ready to move rapidly to avoid harm to consumers.

Second, Tony Cignarale, my deputy commissioner of the Consumer Services and Market Conduct Branch. Tony oversees the examinations and ensures insurers follow consumer protection laws. His team identifies improper claims practices, underwriting violations, and systemic misconduct, including the ongoing State Farm market conduct exam that we will be unveiling shortly. These are the heavy hitters of the department. When the inevitable disaster strikes and chaos unfolds, they and their teams hunker down, crunch the numbers, and monitor insurer behavior in real time.

While others point fingers or even take credit, they quietly jump into action to protect the integrity of our market and safeguard consumers at their most vulnerable. They see the gaps firsthand and know exactly why SB 1209 is needed. I respectfully ask if you can give me some time for them to quickly explain why this bill is so important.

Thank you, Commissioner. Welcome to the deputies. One minute each, please. State your name again for the record. Thank you.

Great. Thank you. Good afternoon, Chair, Members. Tony Cignarale, deputy commissioner of Consumer Services and Market Conduct. On average, the department examines about 100 insurance companies per year for rating, underwriting, and claims practices.

In the course of these exams, we may find a myriad of violations, and we really try to resolve those absent going into enforcement action and litigation. And in most cases, the insurance companies comply, they put a corrective action in place, and we move on and they move on. But there are some companies where you request corrective action and either the company refuses to take that action, or they don't take it in a timely fashion, sometimes years before they take that action to protect consumers.

I can provide you with a myriad of examples, but I'll just give you one. We're currently in an insurance company right now examining them, and we were there three years ago when we identified a problem where they were illegally depreciating property in many property insurance claims.

They agreed to train their staff, stop taking this depreciation, et cetera, et cetera. We're there now. We're finding the exact same problem that we saw three years ago. And now we're back to square one trying to resolve these particular issues, directly on point to 1209. So really, 1209 creates additional authority for the department to require those insurers

Please summarize.

To take corrective action in a timely manner or face penalties for that failure.

Thank you, Deputy. Your name for the record. Welcome.

Good afternoon, Chair and Committee Members. My name is Laura Clements, and I'm the deputy commissioner for the Financial Surveillance Branch. The Financial Surveillance Branch monitors insurers' financial condition through financial exams and reviews. And these examinations review the accuracy of insurers' financial reporting and ensure compliance with statutes, regulations, and statutory accounting principles to determine insurers' financial health. Financial reporting is critical to ensuring that insurers' financial statements are correct and in compliance with insurance laws and regulations, safeguarding their obligations to policyholders.

One major example is some insurers have failed to provide access to all of their books and records to use for reviews. And as a result, the department was unable to determine the insurer's financial condition due to lack of enforcement authority in financial examinations. Another example is an insurer has failed to take action to safeguard their assets by utilizing an approved custodian, and the department may not be able to access those assets in the event of an insolvency in order to pay policyholder claims.

This creates a risky situation for policyholders because assets may be overstated or liabilities may be understated. Both could potentially lead to insolvencies, and if there's insufficient surplus available to fulfill insurers' obligations to policyholders and pay claims, that is detrimental.

So SB 1209 closes the existing enforcement gap so that insurers take proactive and necessary corrective actions to address violations of insurance laws, regulations, and statutory accounting principles, ensuring that insurers' financial condition is reported accurately and the assets are safeguarded to fulfill those insurers' obligations to policyholders. Thank you. I'm available to answer any questions.

All right. Thank you very much. Are there additional witnesses in support of File Item One, SB 1209? Please come forward, approach the microphone, state your name and affiliation and position on the bill. Don't everyone get up at once.

I'm sorry? All right. We'll give the sergeants a moment to make sure that we're including everyone who may be in the hallway. Opportunity to weigh in. Correct.

All right. Thank you for that, sir. All right. We'll ask principal witnesses in opposition of the bill. Please come forward.

Okay. Good afternoon. Two of you. All right. Each will have two minutes. State your name for the record.

Welcome.

Thank you, Mister Chair, Members of the committee. Allison Adey on behalf of the Personal Insurance Federation of California. We are here today in respectful opposition to 1209. We have some evolving conversations as recently as fifteen minutes ago. So I will outline the concerns we have had with the bill as well as the requests that we've made of the author and the commissioner for the discussion purposes. We share the legislature's commitment to strong consumer protection and effective regulatory oversight.

However, as drafted, SB 1209 expands the authority of the California Department of Insurance without consideration for existing legal standards and process. The CDI already has extensive enforcement authority and is one of the largest consumer protection agencies in the nation, with 1,400 employees. Insurers are already under strict oversight through both regulatory and statutory rules. The California Code of Regulations, Title 10, at Section 2591.3 outlines how enforcement actions can be conducted when deemed appropriate.

Given that existing legal authority, the bill instead expands the ability of CDI to mandate recommendations or findings.

These are typically areas where CDI may request changes, but are conducted generally at the discretion of the businesses. That is not addressing a gap in enforcement authority; it's creating a new avenue for authority that allows them to circumvent the Administrative Procedures Act. The bill has also been represented as addressing a difference in authority between the financial examinations division and other examinations departments. However, the bill applies to all forms of examinations, even in proposed amendments by the author and sponsor.

Additionally, there are provisions allowing the penalties in the bill to be duplicative of existing enforcement actions and penalties that CDI already has, which indicates this is not about a gap in authority, it is creating new punitive enforcement mechanisms.

The changes we have requested would address that this only apply to legal violations and not recommendations, prevent stacking of penalties, safeguards so that companies may request additional time when necessary to comply, and only apply the penalty per exam and not per policy. Thank you.

Mark Sektnan with the American Property Casualty Insurance Association. In the essence of time, I'll associate myself with Allison's comments. I just do want to point out one issue with the bill. It does say that you have to refer to standard accounting principles. I do want to point out that the department sometimes does not actually adhere to standard accounting principles.

Prior administrations created a term called most actuarially sound, which does not exist in actuarial science, but has been used by prior administrations to make sure that rates are as low as possible, one step above insolvency, which is part of why we're here today. Thank you.

All right. Thank you both for your testimony. Are there additional individuals who would like to testify, excuse me, register opposition of the bill? Approach the mic, state your name and affiliation and position on the bill. Welcome.

Good afternoon. Shari McHugh representing the Pacific Association of Domestic Insurance Companies. Opposed unless amended. Look forward to working with the author and the sponsor going forward. Thank you.

Chairman and Members, John Norwood on behalf of the Independent Insurance Agents and Brokers of California. The bill also applies to small business insurance agents. So we have some concerns about that as well. We'd like to work with the author. Thank you.

Thank you. Any other individuals want to register opposition to the bill? Seeing no one come forward, we'll bring the conversation back to the committee. Senator Rubio.

Thank you. I want to thank the great Senator from Santa Monica on this bill. It's critically important that when companies refuse to take corrective action, it's appropriate that we hold them accountable, because we want to make sure that the insurance industry is responsive to those that need it. But I do know that there are some language issues for me that were unclear.

And so the good news is I had ample time to talk with the insurance commissioner and wrap our heads around just tightening up the language a little bit to ensure that it's clear.

One of the jobs, I think, as legislators is to make sure that we hold the industry accountable, but also that when we pass legislation, the language is clear, so we don't leave it to generations in the future to figure out what we intended to do. So I already heard some of the things that were of concern, and so I also talked to the author, so I think we're in agreement.

So I just want to make sure that we clarify, because I did hear when I read the word recommendation in the bill, that was a concern for me, because it would rely on a recommendation versus what is a legal violation.

And so we want to make sure that we go after the legal violations, and I heard it from, I believe, the insurance commissioner, and also agreed with the author that that's going to be changed again from recommendation to legal violations so we know that it has legal standing.

Number two, I know it was confusing because I wasn't sure when I read the bill. I wasn't sure how the violations were going to be implemented, whether it was all policies, one policy. The fact that I was confused really gave me concern. So, again, I discussed that, and I already heard it clarified that it's going to be per exam versus policy, and that's important because the Exactly.

Insurance commissioner has the ability to dig deep and make sure that we uncover some of the violations.

But once they do, we have the examination that we can refer to versus a policy. The other issue that was quite obvious when I read the bill was, again, confusing in the potential for stacking violations. Not sure how to address that, but we discussed possible language that would clarify. And that's also been, I heard it from both the insurance commissioner and the industry, that you discussed on how that's going to be moving forward. And lastly, again, with everything said, the duplicate of the violations.

And so, again, I think that's not necessary anymore since all these things are going to be fixed. I think that's going to take care of that. And so I'm just really encouraged by the fact that that's happening, because at the end of the day, we want to make sure that consumers are protected. And again, we can't just leave language that, I know it's happened right now where we're analyzing bills from 2010, 2000, and we have no idea what the intent was. And so clarity is really important.

And so I just want to defer to the author if he can share with me, because I want to make sure that I know what I'm voting on. If this is, or if the insurance commissioner wants to discuss it, I just want to make sure that I know what I'm voting on.

Well, I'd love to turn it to the insurance commissioner. We were just talking it all through. Absolutely. Absolutely.

On the issue around recommendations that may be outside the law, we want to make clear that, obviously, we want to omit recommendations and make sure that corrective actions must be tied to statutes, regulation, statutory accounting principles, and other applicable rules, but not recommendations. And our intent is to actually work on amendments to make sure it's per exam, not per policy.

And then we feel that the stacking issue could easily be solved through just working on some minor language that we are committing to working with the industry on.

If I may. The language that we had received from the sponsor and the author's office did address some of the components around the legal requirements. There were still two clauses that were included that we have requested be struck. It is statutory accounting principles, because we are not sure what that means.

So we're open to a conversation about that, as long as they're legally binding and there's sufficient notice about what exact standards we're going to be held to. The other clause in there was other rules as applied, which again is a little squishy. We're not sure what that means. As long as it's tied to legal obligations, I think we can find a landing spot, but anything that does not have that sufficient safeguard, we have concerns about.

Yeah. I think, if I may, when we're talking about rules, we're meaning regulations that the department approves. So we can clarify that.

Again, wanting to leave it as clear as possible and leave the next commissioner with additional tools and not problems. Okay.

Well, thank you. I just want to make sure that we were clear, because, you know, and I didn't think of the legal standard or, as you mentioned, rules as applied. Again, what I have issue with is that, again, we're looking at bills that are twenty, thirty years ago, and then we're trying to figure out, again, what the intent was.

And at the end of the day, we're trying to take care of consumers, and if we don't clarify all these issues, we leave them exposed to fighting it out in future generations. And so, with that clarity, and thank you. It seems that you both have sat down to discuss some of those issues.

But one thing is clear: we want to make sure that consumers are protected. We want to make sure that any company that refuses to take corrective actions when it's found through an examination that they're not doing the right thing should be held accountable, should pay penalties. And so I'm so happy that you guys came to that agreement. And so hopefully, this will help all the victims that are currently navigating this issue through the Palisades and Eaton Fire. Yeah.

And with that, I'm okay. Thank you.

Thank you, Senator. Other senators wishing to be recognized? Vice Chair Niello.

In all of this, the overriding concern, I'm sure we all agree, is the availability and affordability of insurance. Right?

Yeah. Of course.

How does this further the availability and the affordability of insurance?

The availability, affordability, and the actualization, the real, how to, making sure that people have real coverage, and that the system's working in a way that actually treats people well, and that there's confidence and faith in our state that we have a system in place where violations are enforced against, and that there's a system that ensures that we have a functioning, responsive set of policies for people. So I guess I would go a little bit beyond.

The availability of real high quality service. That's what this is about.

As the bill is written, and I'm not entirely sure what amendments are being accepted, but before the amendments, we have a situation where basically the commissioner is saying, you will comply with this because I said so. He has said that it wouldn't be contrary to established law or ordinances, but the bill as written doesn't specifically say that. And if the determination, and therefore the dictate, went too far, whatever that is, that could discourage insurance companies from even doing business here. That's an availability issue.

So that's why I say, how does this further affordability and availability?

This is about ensuring that these companies are engaging in practices that maintain their solvency, so as to be able to maintain a solvent and strong market in the state. That's at the heart of this. But I'm happy to turn, so that's very much having to do with availability.

So the primary reason for these examinations, and therefore your suggestions, is the financial health of insurance companies?

There's a couple. We have the financial solvency component to these financial examinations, and we have the consumer protection market conduct exams. Are they following consumer protection laws? So this is why we have both. And making sure that, we're very clear that we're able to enforce the violations of the law, but they also require insurers to implement those corrective actions once we find those violations. Currently, we have no legal way to force that they actually correct the violations that we have found.

And so it's twofold. Once, absolutely, it's about availability and affordability. Especially availability in a very volatile market like ours, with climate change, I have to make sure her team has all the documentation around the financial statements and everything she needs to make sure that, especially around the FAIR Plan that everybody seems to talk to me about, that she has all that.

That's that piece. This piece here is to make sure that we have the authority to make sure that the companies implement the corrective actions once we find the violation.

I think the issues that were the semantic issues here is, are we also including recommendations that also are found within some of these examinations, or is it the actual legal violation? And I agree, it should be the legal violations. It shouldn't be recommendations.

And so that just came up. I'm sure the staff were talking. This just happened in the hallway, and I 100% agree. We don't want just a recommendation. It has to be based on some legal basis. And so we agreed to that in the hallway.

I apologize, Mister Vice Chair. We shouldn't be amending this in the hallway, but, you know, this is how sometimes these things happen. And I completely understand if you don't feel comfortable voting on this until we actually have something in writing. I understand. And then the question here is, is it per policy or per violation?

And we agree with industry. It should be per exam to make it more manageable. And then again, that removes the stacking issue here. We feel we can get that fixed too. We're just trying to have them comply with giving us the documentation when we need it as quickly as we can get it so that we can inform you all.

This is why I said I have the heavy hitters here. They are the ones that respond when you ask me, is it true the FAIR Plan's going to implode? I turn around and then text Laura. Is it true what I'm hearing? Right? Is this article true?

And she's mostly going to tell me no, right, because this is what we're seeing. And she can't, and her team cannot do her job. And I'm not saying companies, by the way, I'm not pinpointing any company, but there are a couple that will withhold information to avoid the inevitable.

But we'd rather have that sooner rather than later so that we can work on some sort of plan. That absolutely has to deal with availability of insurance, because the last thing we need is a major company to go insolvent, because then every customer who has that company is in danger.

And with the examination piece, we want to make sure that, as Tony was saying, some of these companies that we found in violation of several legal violations, because we do not have the authority to mandate that they actually comply with these violations and fix them, we're coming back two, three years with new market conduct exams and they still haven't rectified what we already found years ago. And so that's the consumer protection side.

So we're protecting consumers, and we're protecting our very fragile market. Those are the two things that we're trying to do. And I think with the amendments that we're going to work out, I think we're going to be in a much better place where we all agree.

The insurers want to make sure we have a strong market, strong oversight to make sure that everybody is keeping each other in check, and that we have the tools to make sure that when you're violating a market conduct exam, we find violations, that you actually do the corrective action, so we won't have to come back and do the same work over and over again.

So are you saying that you do not have the authority to correct illegal actions?

Go ahead.

Vice Chair, for example, as I mentioned, we conduct about 100 market conduct exams a year. We only take enforcement action on a very few of those, on the more egregious ones, right? We wouldn't be able to take enforcement actions. In order to get corrective action, we would have to take enforcement action on all 100 of those exams, each one of them, and then have the company then under current law violate those again.

So I don't think the insurance companies want us to take two separate long term enforcement actions against them, versus just, you violate the law, you agreed you violated the law, you agreed to fix it, let's just fix it. So that's really where we stand on it.

Now with regard to the financial solvency issue, is that the accounting term that you, in connection with that, that you had a problem with?

Yeah. And if I might just intervene, just because I'm old and old fashioned. When there are interrogatories with members through the chair, when you feel free to respond to the person holding the floor's questions, just before you answer, again, state your name and who is responding so it's clear to everyone who you are, who you're with, when you respond. Thank you so much.

Absolutely, Chair. Allison Adey with the Personal Insurance Federation. Yes. The term that we had seen, and I apologize, there's been so much language back and forth at this point.

I'm not sure if it's in proposed amendments or the bill in print, but it is statutory accounting principles. We had asked that that be struck in our counter amendments because we weren't sure what that meant. And we want to make sure that whatever statutory principles a company is held to are things that they have an obligation to uphold. We have a problem right now in the rate filing process, which my colleague alluded to, with the most actuarially sound principle.

It is a term that was essentially made up in the rate filing process here in California that denotes a tier of accuracy within actuarially sound rates.

Something is actuarially sound or it does not. So that has created a huge amount of delay in the rate filing process for decades. It's something that we would really like to have a larger conversation about at some point, but we don't want this to turn into another one of those by having something that's ambiguous go into statute.

Beg your pardon?

Insurance Commissioner Lara. Just to note that was by a previous administration.

Okay. There's two concepts there. Actuarially sound and financial solvency. And the measurement of financial solvency, the other accounting term you used, was statutory.

It's statutory accounting principles is the term used in the link.

I'm a certified public accountant, and I can tell you that in my world, that term has absolutely no meaning whatsoever. The term is generally accepted accounting principles. And that probably would be more acceptable. Actuarially sound, however, is going to be viewed differently by one who is interested primarily in consumer protection than by one who is primarily interested in its private companies' solvency as measured by GAAP, as we call it. Strange term for that, but that's what it spells.

So this term, potential inconsistency there. But I'm wondering how it is that the regulator would be assessing solvency when a company is actually the best judge of its own solvency, which is one of the things that insurance companies are most concerned with right now in doing business in California, with their solvency. And if it's at risk, they could leave. And that's why I asked, the availability as well as affordability of insurance.

Because if companies leave because their solvency is threatened because of regulatory demands in the state of California, that dramatically affects availability.

Absolutely. If I may, Mister Chair, I can have our deputy commissioner just quickly answer that question, because you'll be surprised.

Yeah. So statements of statutory accounting principles are what the insurers file their financial statements on. So other companies, they use GAAP, and then there's SAP, which, so that's the statement of accounting principles that is being referred to. So it's the financial statements, how the insurers file their financial statements, are based on statutory accounting principles. And all the insurers within the US, that's what their accounting is based on, the statutory accounting principles.

And so I think these, actually, Sam, that's not the same.

And it's not in the bill.

Yeah.

Oh, yeah. I'm not conflating the two. I'm just saying there's a different view of what is actuarially sound depending upon what side of the desk you sit on. The statutory qualification of accounting standards, is that a term that is accepted and acknowledged by AICPA, the American Institute of Certified Public Accountants?

For those that observe these hearings and they come into them late, they don't know who's saying what and why, so please remember to do that. Thank you.

I apologize. I apologize. Laura Clements. All the insurers are required to file financial statements on statutory accounting.

So that's a regulatory issue or creation of the Department of Insurance, seemingly?

All the Departments of Insurance across the US, that's what they file their financial statements on, is statutory accounting, based on statutory accounting principles.

Interesting. I learn something every day.

Senator Richardson, followed by Senator Rubio. Or did you have a follow-up to this line of inquiry? Is that okay with you, Senator Richardson? Senator Rubio, you're recognized.

Not a line of inquiry. But, you know, we just talked so much and laid out so many things that I'd like to see change, and I didn't state for the record that clearly it's not in writing. So I want to be clear that these things have to be in writing, because I want to reserve the right to not be held to vote for it if I don't see some of the discussion that we discussed.

So just to be clear, I wanted to add that for the record. Thank you.

Thank you, Senator. Senator Richardson?

Thank you, Mister Chair. My sister is the CPA of the family, not me. So this whole discussion, but I'll use my MBA and say as follows. I want to start off by thanking the Chair, Senator Rubio, and the author for working together, because I think if we had more of us that were actually working together to bring forward policy that ultimately makes sure that we have good insurers providing insurance to the public that's affordable and accessible, we would have accomplished something.

So I'm going to test my MBA and just clarify that I heard what I heard, that we're now voting on and going to be agreeing to, is that the amendments that are being discussed are talking about, one, we're not talking about recommendations, we're talking about legal violations.

And I'm repeating what I heard Senator Rubio say, that we're not talking about stacking, and we're not talking about this whole discussion of statutory accounting, and you're going to be clarifying the language to true accounting principles. That's what we're voting on and talking about today. Is that correct? I'm asking, I'm sorry, the author. Just wanted

Questions directed to the author? Yes.

Yes. Senator Allen.

Okay. All right. So with that, I'm going to be joining, and I think Rubio was on lead with the bill, but thank you very much.

Thank you, Senator. Any other senators like the floor for questions? All right. We'll entertain a motion.

I'll move the bill.

Senator Rubio moves the bill. Clerk will call.

[Roll Call]

Thank you. We'll place that item on call. Thank you for your testimony on this matter. We'll take up File Item Number Three, SB 1301, also by Senator Allen. If we'll wait a second for a change of witnesses.

All right. Welcome. Please, front center. Senator Allen, proceed when you're ready.

Thank you so much, Mister Chairman. So thank you, for this opportunity. This bill 1301 will make long overdue reforms to the process by which residential property owners choose not to renew someone's property insurance policy also known as non-renewal. So the bill does three things: it requires insurers to be more transparent on the specific reasons.

A policy holder's policy is not being renewed. The notice must include specific information on why their home does not meet the underwriting guidelines. And in the case of wildfire risk-

No problem. The bill also provides policyholders an opportunity to mitigate, you know, to basically mitigate the problems with their property identified by their insurer. If the policyholder conducts the mitigation, provides evidence, and the insurer agrees that the mitigation work has been done appropriately, then the policy will be renewed. And then it prohibits some unreasonable bases for non-renewal, including claims made below the policyholder's deductible, claims made that the insured did not pay for, and claims not covered by the policy, to name a few.

California policyholders unfortunately receive a non-renewal notice from their insurers at the fourth highest rate in the nation, behind Florida, Louisiana, and North Carolina.

Ahead of the devastating fires that we experienced in Los Angeles, the three largest companies announced their plans to drop nearly 50,000 policies. More than a fifth of those non-renewed policies were in or adjacent to areas that would soon burn in the fires, leaving many customers vulnerable to insufficient coverage. So one of the challenges we have is that the non-renewal notices that people receive now are quite opaque. They don't sufficiently specify why a policyholder is being dropped.

Policyholders receive non-renewal letters from their property insurer containing all sorts of vague phrases like, you know, property does not meet underwriting standards.

There are almost very rarely documented issues or proof of criteria. Policyholders rarely have an opportunity to fix the problem with their property before being dropped in order to maintain coverage. The opaqueness associated with the information that they're getting, or the lack of information, makes it really hard for policyholders, and it sure allows insurers to drop policies for safe homes without accountability.

And just for some examples, there are incidents where the insurer references problems with the property that are nonexistent or pulled from a two-year-old Google Earth photo. In another incident, a homeowner was non-renewed because his property had, quote, too many losses, but the claim in question was for one that the insurer didn't even pay for.

There are also some incidents where homeowners are non-renewed when they have never even made a claim. So this bill addresses these problems for consumers by ensuring that they receive more detailed and transparent notices. They have an opportunity to mitigate. They're treated appropriately by prohibiting unfair bases for non-renewals. The bill also balances the need for insurers.

You know, importantly, insurers only need to offer a mitigation opportunity to policyholders whose homes can meet their underwriting guidelines. So if they adjust their underwriting guidelines such that they will no longer offer policies in a specific neighborhood to balance their risk exposure, this bill does not require them to offer policyholders a mitigation opportunity in that case. So it ensures underwriting guidelines are public documents. They dictate property that they will insure.

This bill just asks them to abide by those guidelines if there's something that the owner can do to meet the standards, and it asks them to point to the standards which a property might be violating in their non-renewal notices to consumers. And then, by the way, that can include also that they don't feel comfortable with what a community is doing to reduce risk. And, you know, that's okay too.

I mean, at the end of the day, it's not a bad thing for at least there's more transparency. People can then go to their community leadership and ask for more work on wildfire mitigation, etcetera.

So with me to speak in support of the bill, we have Magda Molina, who's a consumer speaking about her own experiences, and then also Carmen Balber, executive director of Consumer Watchdog.

Is it still on? Yep. Okay. Good afternoon. My name is Magda Molina, and my husband and I live in Los Angeles, where we own a 1924 home with two small rental units.

We've owned and maintained this property for over twenty-seven years, and it is a central part of our retirement. We have never filed a single insurance claim. In 2023, our insurer stopped writing landlord policies in California and just dropped us. We found a new insurer, and shortly after, they told us we needed to address granular loss on our roof or face non-renewal. Our roof was about 15 years old, in good condition, and had never leaked.

We worked through our broker, followed the insurer's instructions exactly, and spent more than $8,000, money we had to borrow, to complete the work using a licensed contractor in full compliance with California code, which is among the strictest in the country.

Our insurer acknowledged receiving all of our documentation, but months later, we were told it wasn't enough and our policy was non-renewed anyway. Only then were we told they expected a full roof replacement, which would have cost over $30,000. So we did everything we were told on a roof that was functioning properly, spent money we didn't have, and still lost our coverage. That kind of unpredictability is devastating, not just financially, but for our sense of security as we approach retirement. That's why I'm here supporting SB 1301.

This bill would require insurers to clearly state in writing what is needed to maintain coverage, give homeowners a real opportunity and time to comply, and prevent non-renewals based solely on roof age if there's still useful life remaining.

If those protections had been in place, we would likely still have our policy today. I respectfully urge you to support SB 1301. Thank you so much.

Thank you, Chair and Members. My name is Carmen Balber. I'm executive director of Consumer Watchdog. SB 1301 will help Californians stay insured by giving families a chance to prevent non-renewal of their home, condo, or renters insurance. California ranks fourth highest in the nation for non-renewals, and three hundred fifty thousand families lost their home insurance between 2018 and 2023.

And while wildfire risk is the headline reason for non-renewals, loss of coverage is often due to the types of reasons that the Senator and Magda described. So SB 1301 would give consumers more time and more information to try and keep their home insurance. Importantly, insurance companies will spell out who is eligible for coverage. They do so in the underwriting guidelines, which are filed with the Department of Insurance and are public, as the Senator said. But these are not disclosed to consumers, and we think that's the gap.

Because if consumers don't know an insurance company's rules, how can they meet them? SB 1301 simply gives them the opportunity to do what their insurance company wants. Non-renewals can happen for many reasons: correctable issues, issues that occur because the insurance company's communication is simply unclear, or they can be based on bad information, old photographs, misinterpreted information, and SB 1301 cuts through this confusion.

An insurance company can also tell a consumer that there is nothing they can do to renew the policy because they don't meet the insurer's underwriting guidelines.

This change is universally popular. Over 90% of California voters polled said they support requiring insurers to give more notice of non-renewals, specific written justification, an explanation of any possible repairs, and time to make those improvements. So we urge your support for this bill to give families a chance to maintain their home insurance through more transparent processes.

Thank you so much for your testimony. Are there any individuals who would like to come forward at the mic to register support for this bill? Come forward, state your name and affiliation, please, and position on the bill. And give us just a moment while we check for folks outside the hearing room.

Hi. My name is Dustin Bramwell. I'm a business owner and nonprofit executive, and I support this bill after losing my home in the Palisades Fire. Thank you.

Good afternoon. Amy Bach with United Policyholders, and we support this bill and appreciate all the work that's going on to fine-tune it. Thank you.

Good afternoon. Danny Kendall Kaiser on behalf of the California Low Income Consumer Coalition in support.

Good afternoon. I'm Nathan Prevost. I'm Magda's husband. And all in all, we were dropped four times in less than two years. I'm in support.

Good afternoon, Mr. Chairman and Members. Robert Herrell. I'm the executive director of the Consumer Federation of California and in strong support. Thank you.

Mr. Chair and Members, Julia Navarez on behalf of the League of California Cities in support.

Hi. I'm Joy Chen, Eaton Fire survivor, Eaton Fire Survivors Network. Over 10,000 Eaton and Palisades fire survivors in support. Thank you.

Hello. My name is Ada Hernandez. I'm an Eaton Fire survivor, and I am in support.

Hi. My name is Rosanna Valverde. I'm an Eaton Fire survivor, and I'm here in support.

Hi. My name is Ray Reynaga, Eaton Canyon Fire survivor, here from My Tribe Rise organization. I'm in support of this bill.

Thank you.

Hi. My name is Alicia Reynaga, Eaton Canyon Fire survivor, and I'm in support of this bill.

Hi. My name is Damon Blunt. I'm an Altadena Eaton County survivor, and I'm in support of this bill.

Hello. I am Audra Blunt, also an Altadena Fire survivor, and I am in support of this bill.

Hello. My name is Jose Madera. I'm director of the Pasadena Community Job Center, which is part of the National Day Labor Organizing Network, and strongly in support of this bill. Thank you.

Hi. My name is Florence Henang, lead organizer for POP, Pasadena's Organizing for Progress. We're in support of this bill.

Will Abrams with the Utility Wildfire Survivor Coalition and PG&E Wildfire Survivor from the 2017 fires, in support.

Hello. I'm Doreen Zimmerman with the Camp Fire Survivors, and I am in support of this bill. Thank you.

Good afternoon. Rebecca Marcus on behalf of the Consumer Protection Policy Center at the University of San Diego School of Law. Thank you. In support.

Good afternoon. Anna Ornakyan, Eaton Fire survivor representing EFRU, EFSN, and Extreme Weather Survivors in support of this bill.

Hello. Roberta Giordano, Sonoma County resident, in support.

My name is Jane Lawton Potel, and I'm the executive director of EFRU, Eaton Fire Residents United, and we are in strong support. Thank you.

My name is Claire Thompson. I'm an Altadena homeowner, and I'm in support of this bill.

My name is Alyssa Ashwood. I'm a Palisades Fire survivor and in support, representing multigenerational families who lost homes as well as standing homes in the Palisades, in support.

Good afternoon, Chair and Members. Mari Lopez with the California Nurses Association in support.

Thank you. Renee Bayardo representing Rise Economy in support.

Good afternoon. Kim Stone, Stone Advocacy. I've been asked to convey the support of the American Policyholder Association, United Survivors Disaster Relief, Green America, Leap of Faith Family to Family Support, Americans for Financial Reform, Consumer Attorneys of California, Food and Water Watch, and Eaton Fire Renters Coalition. Thank you.

Laura O'Connor on behalf of the O'Connor Legacy Fund and cross-sector supporters across Southern California supporting fire survivors and inspired collaboration, strongly in support of the bill. Thank you.

Thank you. Good afternoon. Alfred Ramirez on behalf of AARP, and we are in support of the bill. Thank you. Thank you.

Thank you very much for your participation. Alright. Now we'll ask for lead witnesses in opposition to the bill. Please approach. We have another individual who wants to register support.

Come forward to the mic, state your name and affiliation, please.

Sierra Cost, [unintelligible], in strong support.

Thank you. Anyone else? Individuals want to register support for the bill? Alright. Now we'll ask opposition lead witnesses to approach.

Welcome. You'll each have two minutes. Please state your name for the record. Thank you.

Thank you, Chair Padilla and Members. Paul Ramey with the Personal Insurance Federation of California in respectful opposition to SB 1301. California already has one of the longest non-renewal notice periods in the country at seventy-five days. The national standard is sixty days. The one hundred and eighty days proposed in this bill would make California's non-renewal notice period by far the longest in the nation, leading to significant uncertainty for both insurers and policyholders.

The timelines proposed would require insurers to make non-renewal decisions almost immediately upon writing or renewing the policy in the first place. Additionally, the dispute and extension procedure proposed in the bill adds at least another one hundred and eighty days, making the non-renewal process nearly the entire length of the original contract. Unfortunately, extended notice periods often add very little value for many consumers and likely lead to significant confusion.

Non-renewal decisions are often made based on factors that have nothing to do with the condition of the home or property. Market factors, financial condition, and overall risk portfolio often drive underwriting decisions.

In other words, consumers could get a notice halfway through their current policy that their insurance is going to be non-renewed in six months, even when there is no mitigation or remediation work that would change that decision. Finally, there seems to be an underlying premise that insurance companies are inventing creative ways to avoid writing insurance policies. Nothing could be further from the truth.

The industry has spent the better part of the last decade working with legislators and regulators to deal with the realities that climate change has fundamentally changed the risk profile of the state, and changes are needed to reflect that increased risk.

We're confident the Commissioner's Sustainable Insurance Strategy, which has just begun to take effect, will help to improve the existing availability crisis, but proposals that make it overly challenging for insurers to manage their risk profile will inevitably force companies to tighten their underwriting standards, shrinking the pool of eligible properties, or accelerate their exit from California altogether.

Ultimately, insurers are in the sales business, and companies today regularly work with their customers to identify and communicate property-specific mitigation measures that need to be taken in order to continue writing or renewing policies to keep their business.

Please summarize.

Thank you. To the extent that's the goal of this bill, to encourage that kind of communication or opportunity to remediate property-specific issues, we believe there's a reasonable and thoughtful way to accomplish that goal. We've been working with the author, and we believe there is significant common ground.

Thank you very much. Welcome.

Good afternoon, Chair and Members. My name is Mark Sektnan with the American Property Casualty Insurance Association. In addition to creating the longest non-renewal timelines in the nation, there are other issues with SB 1301. The bill significantly expands existing reporting obligations by requiring insurers to send more detailed policy-level information to the Department of Insurance regarding renewal and non-renewal activity.

The bill shifts reporting from aggregate outcomes to individualized underwriting justifications, requiring insurers to explain why actions were taken on a policy-by-policy basis.

This will substantially increase reporting granularity and creates the risk of oversimplification and misinterpretation. In addition, many underwriting decisions are not policy-specific. The bill also places new restrictions on underwriting decisions based on claim-related activity. Claim inquiries and unpaid claims may still reflect increased risk, property condition issues, and loss frequency concerns. Prohibiting reliance on this information limits insurers' ability to assess risk holistically.

The bill also prohibits an insurer from refusing to renew, non-renewing, or reducing coverage based solely on roof age if the roof is determined to have useful life. The bill needs to be clarified to make it clear the homeowner pays for the inspection. Prohibiting underwriting actions based solely on roof age, which is one of the strongest predictors of wind and hail losses, particularly as severe convection storms increase nationwide. The bill also creates a subjective remaining useful life standard.

There's no uniform industry methodology for determining useful life. Inspection outcomes may vary widely, and assessments may be influenced by contractor involvement or consumer pressure.

In addition, hidden roof vulnerabilities are not reliably inspected. Critical performance features, such as deterioration of adhesive sealants and the asphalt shingles, often occur well before visible surface damage and typically around the eight to ten year mark. These vulnerabilities materially increase wind uplift and water intrusion, but are not easily identified through visual inspections. We look forward to continuing our work with the author and the sponsor. Thank you.

Thank you very much. At this time, we'll ask individuals and organizations who want to express opposition to the bill to come forward, state your name and affiliation and position. Welcome.

Thank you very much. Good afternoon. Shari McHugh, representing the Pacific Association of Domestic Insurance Companies, respectfully opposed to the bill. Thank you.

Anyone else wishing to register opposition to the bill? Alright. We'll bring it back to the Committee. Senator Richardson.

Yes. Thank you, Mr. Chairman. First of all, one of the challenges I think we find as Members is bills are coming up pretty quickly and there really isn't a whole lot of time to have the discussions. But I want to thank the author, Senator Allen, for, you know, bringing up an issue that a lot of Californians face.

However, I think it's important. One of the points that was brought up had to do with this time frame, and I did have an opportunity to speak to the author about that.

And, is it, are you, would you like to share your thoughts about potentially making some changes within the time frame?

Yeah. I mean, upon your request, we were willing to bring the time down to three months. The one thing that we're discussing is some sort of bifurcated program where, if you are working with the insurer in terms of mitigation, you could then have some more time. But if you're just going to be dropped and you're shopping now for another policy, that would be three months. Okay.

So we have to kind of finalize language with them on this, but we've discussed it a little bit outside.

Okay. So understanding that the author is working with the industry, then I'm going to move the bill that we support it.

Thank you, Senator. I'll move the bill. Senator, would you like to call any other Members? Vice Chair Niello?

The time frame was a significant concern as I read this. So I appreciate that comment. But still, that's a third of the typical policy period. And Senator Richardson made a very relevant comment about the number of proposals that we're getting, proposed bills that we're getting, and the additional requirements that each one incrementally is requiring.

We had a bill last week that was very significant that the Chair authored that I had concerns about. The bill before this, similarly, this bill. Each bill individually could have consideration for support. But when you add all of them together, that's where I become concerned. I asked about affordability and availability of insurance.

That's where I become concerned about the availability. And when we look at the rest of the country, I think the average of notification is more like sixty days, and

Florida's a hundred twenty. Florida is a hundred twenty days.

I didn't talk about specifics. Yeah. I was talking about. Alright. You can cherry-pick individual statistics to support a position.

I get that. But the availability, the ability to do business in the state of California, which is challenging for any business, and the insurance business has a microscope on it given unique situations currently. And each one adding more regulations, more requirements on top of insurance companies here that in many cases are in excess of what other states do. On average, you can always find specific examples. But that's when I become concerned about availability.

And we need to have a regulatory scheme here that is fair to consumers and fair to the companies so that we keep companies here.

They are in considerably threatened existence as it is. And that should be our primary concern. I think the multitude of these bills tends to discourage insurance companies from doing business here. And that's my concern in this case: availability.

Alright. Thank you, Senator. Senator Becker?

Yeah. Just a quick comment. I appreciate the conversation here. I appreciate what the author's doing in this area. You know, again, we're working with the opposition on some reasonable accommodations on timeline, and such like this, I think, is important.

But, you know, I certainly feel for everyone who's had non-renewal, and I've heard the stories in my district without any explanation, and I appreciate the goals of what you're doing here.

Thank you very much. Senator Allen, would you like to close?

Yeah. No. Appreciate the discussion. I may just remind my friend, the Vice Chair, this is not telling folks that they have to insure people. It just is about providing a little bit of time to allow them the opportunity to go find another policy. So ultimately, that's simply what this bill does.

We're now going to knock it down considerably, close to the national average. So I hear you on all the bills. I mean, you're the Vice Chair of this committee, so you're evaluating them all. But I just want to get back to what this bill does.

I mean, this bill is just about providing people with a little bit of time, you know, because it's incredibly disconcerting and difficult to have to scramble, especially if you're on a mortgage. And it does take some time. And you also want to encourage people to mitigate. I mean, at the end of the day, a lot of what we want to do here is try to get people to risk reduce, and that will help.

I mean, if we're looking for any real way to solve this problem that you've articulated so well without just making it incredibly expensive and difficult for consumers, it's going to be about trying to encourage this kind of risk reduction work that is at the heart of this bill, giving people that time. So with that, I respectfully ask for an aye vote.

Thank you very much, Senator. The bill's been moved by Senator Richardson. The Committee assistant will call.

[Roll Call]

Thank you. We'll leave that item on call. We'll take up, in the special order file, item number 2, SB 1026 by Senator Gonzales. I see that Senator Gonzales is present. Give folks a minute to change out witnesses.

Welcome, Senator. Welcome, Senator. Proceed when ready.

Alright. Thank you. Good afternoon, Mister chair and members. One Sec. I need to grab my glasses for a moment.

I'm here today to present Senate Bill 1026, the Bail Fugitive Recovery Agent Reform Act. BFRAs are commonly known as bounty hunters and are a legally recognized profession unique to California's bail system. Bounty hunters are not law enforcement and do not have the same level of oversight or regulation as uniformed officers. They contract with licensed bail agents to apprehend fugitives who have failed to show up in court and that is the only action that bounty hunters are authorized to perform.

In 2022, the Legislature established a formal licensure program for bounty hunters administered through the Department of Insurance with post certified training requirements and conduct restrictions.

These were important guardrails on the profession to protect the public. But gaps have emerged since its passage. While law enforcement misconduct has multiple avenues for swift and proportionate discipline, bounty hunter misconduct does not. Because conduct requirements are housed in the penal code rather than the insurance code, CDI, the Department of Insurance, cannot discipline a bounty hunter without a criminal conviction, meaning a licensee can engage in serious misconduct and remain active in the field for years while a case works through the courts.

SB 1026 closes this gap by giving the Department of Insurance the authority to suspend or revoke a license for misconduct without a criminal conviction, strengthening oversight on these agents.

This bill also expands conduct requirements to prohibit disguises or false identities, use of excessive force, the detention of any person other than the bail fugitive that they are required to go after, loitering, and threat or intimidation. Finally, SB 1026 closes multiple loopholes in existing insurance requirements to ensure that agents in the field carry adequate and consistent liability coverage. Taken together, these reforms will protect the public and ensure that agents who exceed their statutory authority face real consequences.

We understand some of the opposition's concerns and are committed to ensuring the bill is implementable without compromising the intention or keeping, and keeping California safe. With me to testify in support, I have our Commissioner of Insurance, Ricardo Lara, as well as, one of our Insurance Commissioner Technical, Assistants.

And I wanna thank you and ask for an aye on this bill.

Thank you. Welcome back, Commissioner Lara. How would you like to divide your time?

I would do the primary testimony and just answer any technical.

Thank you, sir. Please proceed.

Thank you, Mister chair. California took an important step in 2022 when the legislature passed my sponsored bill AB 2043, creating the state's first licensing program for bounty hunters. The bill finally brought oversight to an industry that operated for decades with virtually no guardrails. But since implementing the program, my department has identified serious loopholes that be that are being exploited. Loopholes that put public at risk and undermine the very purpose of licensure.

And we continue to receive ongoing complaints of bounty hunters breaking into the wrong homes, harassing innocent residents, wearing badges and tactical gear that mimic law enforcement, and misrepresenting themselves as government officials. In one case, from Hawthorne, California, a woman and her husband were subject to separate home invasions to two separate home invasions by bounty hunters looking for someone who didn't even live there.

During a second incident, they threatened to report her to her employer, told her and her husband he would be referred to ICE, and attempted to take her into custody until her husband called the police. These are not isolated incidents. My department has opened investigations involving kidnapping, burglary, extortion, false imprisonment, and even fatalities caused by bounty hunters.

This committee has long supported oversight of the bail industry. SB 1026 is the next essential step. Despite the progress of AB 2043, two major gaps remained as the author has indicated. First, the law requires bounty hunters to file a $1,000,000 liability insurance policy when applying for or renewing a license. But it does not require them to maintain that coverage throughout the license term or notify the department if it lapses.

This has led to policy hopping, switching from one bail agency's policy to another or using a or using policies that only cover them inside their office, not in the field where the risk occurs. This makes it nearly impossible to ensure that coverage is in place when the public is harmed. Second, bounty hunters must file the notice of appointment from a bail agent before apprehending a fugitive. But notices are often filed after the apprehension and in some cases appear to have been backdated.

This undermines oversight and has been and has had deadly consequences.

In March, a man was shot and killed in Newark by a bounty hunter who had no notice of appointment on file with my department at the time of the incident. SB 1026 strengthens public safety and accountability in three ways. It ensures continuous insurance coverage. It fixes the appointment loophole, and it establishes enforceable conduct standards.

I just wanna also be clear as the author stated, my department is committed to again, we recently heard of concerns from the bail industry regarding the availability of the $1,000,000 liability policy in the admitted market as required under existing law, as well as a question about the legality of covering a bounty hunter's willful or wrongful acts or omissions.

Just wanna be clear, my department is committed to continuing to engage with the opposition on these availability issues as the bill moves forward, and we will work collaboratively to ensure that the final product both is effective and protects consumers. Today, again, the conduct rules are in the penal code, meaning that CDI cannot act unless there is criminal conviction. Otherwise, our overburdened courts cannot always deliver.

So just, in closing, SB 1026 is a comprehensive targeted reform that closes dangerous loopholes, strengthening insurance and appointment requirements and gives CDI the authority needed to protect Californians from unsafe or unlawful bounty hunter conduct. It just restores confidence in the system and ensures that bounty hunters operate responsibly, transparently, and under clear enforceable rules.

I respectfully ask for your ate vote.

Thank you, commissioner. Are there individuals or representing organizations that would like to register support on SB 1026. Please come forward to the mic. State your name and affiliation and position on the bill. Seeing no one, we'll invite principal witnesses in opposition.

Please come forward. Thank you. Might need you to pause for a moment just in case, but please be prepared to state your name for the record. Each of you will have two minutes. Welcome.

Please proceed.

Good afternoon, Chair and members. Pat Whalen, Ellis and Wilson Advocacy here on behalf of Aladdin Bail Bonds. We are the largest bail, agency in California. And while we appreciate, the authors and the commissioner's concerns for consumer protection and don't object to the vast majority of them, this bill as it currently written, nobody no bail agency in California can comply with it. It's legally and practically impossible to comply with it for a number of reasons.

One, the bill requires that the insurance the $1,000,000 insurance policy cover willful acts of the bail recovery agents. That is contrary to existing provisions in the insurance code, section 533. It's contrary to long standing California Public Policy and Civil Code section 1668. And as a practical matter, insurance companies can calculate the actuarial risk for accidents and random events. They can't calculate, actuarial risk for willful intentional acts.

It leads to collusion. No insurance company is gonna write a policy that that covers willful acts. Secondly, this bill requires that the policy be provided by an admitted carrier. That's contrary to current law. There was reference to the bill by Assemblymember Reggie Joan Sawyer, 2043 a couple years ago.

That didn't have that requirement. We have asked repeatedly, members of the, Department of Insurance whether there are any admitted carriers that would write this policy. We had three different people ask the same question three different times. We got three different answers. First answer was we don't know.

Second answer was, yes, there are a few, but we can't tell you who they are. And the third answer was, well, we're looking at the market conditions. And we have the emails, we have the receipts on that. As I referenced with, AB 2043 a few years ago, that bill had a safety valve in it. It had the $1,000,000 insurance policy, but allowed the insurance commissioner to waive that requirement if the policy was not available or not affordable.

This bill takes away that safety valve. It expressly deletes that from existing existing law and makes the insurance harder than it was a couple years ago to get because it now has to cover willful acts, which 2043 didn't have that requirement, And it has to be only an admitted carrier. 2043 didn't have that requirement.

One would think that if you're going to come in here and delete a safety valve that is evidence that only two or three years ago, there was a recognition that this product may not exist. That there would be some burden on behalf of the proponents to show that there actually are admitted carriers to write this policy.

We don't have that. There's a number of other, problems with the bill. It imposes a two year residency requirement on on agents, which has repeatedly been found unconstitutional under the Privileges and Immunities Clause and the Commerce Clause. And I'll turn it over to my colleague to address some of the other issues.

Welcome.

Good afternoon, mister chairman and members. My name is Carl London. I'm here today on behalf of Golden State Bail Agents Association, Lexington National Insurance Corporation, and also Crime Victims United. Absolutely love the author. Think that she's been given bad information on this bill, and we would urge your no vote on this bill. I wanna reiterate the comments that Mister Whelan made.

Such coverage that is being talked about here is absolutely not available in the state. The prior law did contain the requirement that it be accessible and affordable. It is not. It does not exist. We're also not aware of any other state that requires a similar level of insurance.

In fact, when we looked into the Jones Sawyer Bill, there were only four other states that had a requirement like this. The next closest was $300,000. Every other state was just have a policy, doesn't really matter the level. SB 1026 creates a new regulatory scheme that's meant to apply, and let's keep this in mind. This scheme would apply to approximately 180 people in California.

The requirements are extensive, they're unduly burdensome, and they do not target bad actors. We've asked CDI for information regarding the bad actors. We've received very unspecific answers related to that. But what's interesting is in identifying the bad acts already regulated under law, the department in a way is arguing against itself by pointing out it already has information about these cases that it's in the middle of taking actions, but now needs new authority to move forward on such acts. What does this add is the question then?

We've and again, we've asked for information on this as to specific cases, we've received none. The last thing I wanna say about this on behalf of Crime Victims United, we oppose this measure because it will undoubtedly result in less recovery agents being available in California, meaning less people to enforce bail agreements and promises that those folks have made to show up for criminal court hearings. That means delayed justice for crime victims.

There are in LA County as of 2018, over 2,000,000 outstanding bench warrants for people who promised to show up to court for an alleged crime. Doesn't mean they're guilty, but they had a warrant to show back up.

They haven't shown back up. Not all those are associated with bail requirements, but it gives you some level of the scope of the problem we face in trying to make sure that people show back up to face for the criminal, crimes that they face, in terms of an allegation. For those reasons, we oppose this bill and we urge your no vote on this measure. Thank you.

Thank you. Alright. This time, we'll invite individuals or representing organizations in opposition to the bill. Please come forward to the mic. State your name and affiliation and position on the bill.

Welcome.

Chairman Padilla, Topo Padilla, 42 year Licensed Bail Agent and a Licensed Fugitive Recovery Agent, not a bounty hunter. So I strongly urge opposition to this bill.

Greg Padilla, owner of Greg Padilla Bail Bonds. 47 years in the business, Bail Agent and Fugitive Recovery Agent. I oppose this bill.

Carolyn Veal Hunter on behalf of Bail Hotline Bail Bonds, a family owned bail agency with over 25, offices throughout the state and Financial Casualty Insurance Company, one of the bond rider, one of the largest, insurance bail bonds riders in the nation. Opposed the bill.

Robert Dick, Bail Education Association, over 30 years in the industry. I strongly oppose the bill.

David Quintana on behalf of the California Bail Agents Association, strongly opposed to this bill.

Mark Sektnan with the American Property Casual Insurance Association opposed to the bill.

Thank you. Anyone else or representing themselves or an organization wanna register opposition to this bill? Seeing no one come forward, we will bring it back to the committee.

Yes.

Vice chair Niello.

First of all, I have also great respect for our for the gentle lady from Long Beach as I've referred to her on the floor. But I do have concerns about the bill. Probably the biggest concern being the insurance issue, the availability of it. But also that phrase, illegal, excuse me, willful or wrongful acts. Now in the context of a legal document wrongful means illegal, really.

And, I am not aware of any insurance company that's gonna cover an insured for doing something willfully illegal. That pretty sure doesn't exist on the on the market. And we one of the opposition witnesses represents the insurance agency. Is he still here? The insurance industry.

I mean, is he is Mark here?

I'm not sure.

Perhaps he's outside in the hallway?

We do have and we're and Mister vice chair, we're still working on this language with the opposition. But I also have here Damon Dietrich who is our attorney and privacy consultant for the CDI who can elaborate on that if need be on the willful portion of it, which, you know, we're continuing to work with them.

Mister Vice chair, let's face it.

See what you have to say.

Alright? The chair.

Please state your name.

Hi. Damon Diederich, attorney and privacy office for the department. Yeah. This is language that we had run through our enforcement folks. We understand that there are issues with the language and, you know, as the Senator and the commissioner have alluded to, we're intend on fixing this language.

You know unfortunately we just weren't able to do so before the committee amendment deadline.

So you're working on that?

Yes.

Okay. Well the bill as is in print gives me great concern and the victims united position I think is one with which we ought to be very concerned to the extent that they believe that compromises justice. And we certainly wouldn't wanna do something that effectively, eliminates the ability of these, companies to do business here. So, I can't support the bill today but, wait to see what sort of amendments come out. So thank you.

Thank you, Mister vice chair. Would you like to close, Senator?

Yes. And thank you, Mister chair and to the committee and Mister vice chair for, indulging us with this bill. I you know, we don't cert- of course, this is not intended to delay justice. This really is intended to put some guardrails around the licensure, and I will just correct what the opposition men mentioned about the $1,000,000 insurance requirements that are already actually in statute through the former bill AB 2043.

And there are admitted carriers now that do cover BFRAs, currently, so I don't want this to be, miscommunicated that, you know, admitted insurers will not, for some reason cover BFRAs because they do so currently.

And we have, from our figures, 225 BFRAs across the state versus 180, and we are committed to continuing to work with the opposition, to your earlier point. I will provide our commissioner or our privacy officer additional comments if they'd like to close to. Okay. Well, then I respectfully ask for an aye vote.

Thank you that we're concluded with testimony. Alright. I think we are waiting on a member to return. I will just say, I think the bill is circumstantially worthy to continue to evolve in the through these discussions. And, you know, I know that there are some controversial elements around it and concerns, but I get the sense that those are gonna continue to be dialogued around.

It's an old saying, the best surety in insurance is a surety in insurance. And so with that, we'll entertain a motion. Thank you. Senator Richardson moves the bill. Committee assistant will call.

Motion is do passed to Appropriations Committee. Senators, Padilla?

Padilla, aye. Niello?

Aye.

Niello, no. Becker?

No.

Aye.

Becker, aye. Jones? Menjivar? Richardson?

Aye.

Richardson, aye. Rubio?

Thank you. That item is placed on call. Alright. Thank you for your patience.

We'll go back to, the file. We will take file item number 7, SB982, Senator Wiener. Next, I see that Senator Wiener is here. I'll give a few minutes for witnesses to approach the table.

Good afternoon.

Thank you. And welcome, Senator Wenner. You may proceed, Wenner.

Thank you very much, Mr. Chair and colleagues. I'm here to present Senate Bill nine eighty two, the Affordable Insurance and Recovery Act. A first in the nation plan to tackle California's intertwined affordability and climate crisis. Last night in the Senate Judiciary Committee, when the bill was passed out on reconsideration, I committed to taking a number of amendments in the next committee where it's possible to amend the bill.

These amendments include eliminating retroactivity in the bill, providing the liability begins 01/01/2032, and allowing covered fossil fuel entities to demonstrate emission reductions based on clean energy to demonstrate emission reductions based on clean energy investment to decrease their proportional share

of liability by twice dollar amount of the demonstrated emission reductions. And emission reduction credits start accumulating this coming January. So the fossil fuel companies will have an incentive to invest in clean energy to reduce emissions and that will benefit them and that will benefit them in thank you. That will benefit them in future liability. Colleagues, the cost of home insurance as this committee knows better than most, has become an absolute crisis for Californians threatening people's financial stability and threatening their ability to even own a home.

Rates in California have risen nearly 30% above inflation over the past decade with increases as high as a 150% in some areas. And with private insurers refusing to renew record numbers of home insurance plans, a massive number of Californians are now relying on the FAIR plan. Even the FAIR plan is now seeing costs rise to unsustainable levels.

The plan is currently seeking approval to raise rates more than 35% on policyholders after the plan was forced to pay on more than $3,500,000,000 for last year's catastrophic LA wildfires. Needless to say, Californians already paid too way too much for housing.

They cannot afford this additional cost. The crisis is especially acute for extreme weather survivors. The road to recovery is long as members of this committee know. And for some, the cost of insurance means they will never be able to return to the homes that they have lost. With Californians paying such a massive cost, we have to ask who is not paying.

We know who is paying, the victims, people who lose their homes, their lives of family members, their businesses burned to the ground, their communities burned. They're paying. Taxpayers are paying. State and local taxes are being used to repair communities and to rebuild. It is a strain on tax dollars.

And of course, policyholders are paying all across the state paying higher premiums. So that's who's paying for these climate disasters, the wildfires, the floods, the extreme weather events. So who's not paying? There's one big entity that's involved in this that's not paying and that is the fossil fuel industry.

The industry that for many years has sold the product that causes or contributes significantly to these climate disasters, an industry that knew decades and decades ago from its own internal scientists that its product would fuel climate change and would fuel these disasters, and that then either hid that science or even denied it publicly, lied publicly claiming that its products did not cause climate change even though it knew from its own internal science that it did.

At the same time that it was hiding or even lying about its products fueling climate change and disasters, the oil industry politically obstructed for decades a transition to clean energy, completely obstructed it. If you remember when President Carter put solar panels on the roof of the White House, in the nineteen seventies. This is clean energy is not like a it's just like a brand new thing that happened a few years ago. This has been around for a long time.

And then, of course, with the change of administration, those solar panels were removed, and that is sort of in some ways symbolic, that one set of solar panels for what happened politically in this country.

And the oil industry was behind it, obstructing that transition, meaning more fossil fuel being burned, more climate change, more and worse climate disasters, more communities and homes and businesses being burned to the ground were flooded. Californians should not be forced to continue to bear the full weight of these disasters without participation from the industry that has helped fuel these disasters, the fossil fuel industry.

We must provide a path to insurance affordability as we tackle the challenges of life on the front lines of the climate crisis in California. SB 982 will provide will help provide that path to affordability by making fossil fuel companies, not only Californians, pay the cost of these disasters.

The bill will empower the attorney general to bring fossil fuel companies responsible for climate disasters to court on behalf of the people of California to recover either losses to the fair plan for climate attributable events like floods or wildfires, or the cost paid by private policy holders that have been increased because of climate disasters.

This bill is very narrow and focused. Only the attorney general can bring a lawsuit and it only relates to increases to the fair plan or to private policies. We had a broader version last year. This is a narrower narrower narrower narrower more focused version. Sorry for not being able to pronounce that word.

And so we know things are going to get worse, unfortunately, and so now is the time to act, and I respectfully ask for your aye vote. With me today to testify are Marissa Arguello, a survivor of the twenty twenty four San Diego floods, and doctor Fran Moore, the Hurlston presidential chair and the Department of Environmental Science and Policy, who previously served as senior economist at the White House Council of Economic Advisors under president Biden.

For technical assistance, we have Gordon Levitt from the Center for Climate Integrity. Thank you.

Thank you. Welcome. Each of you have two minutes. Please state your name for the record.

Marissa Aguayo.

Francis Moore

Please proceed with your testimony. Thank you.

Good afternoon, Chair Padilla and members. My name is Marissa Aguayo. I'm a mother, a daughter, and a lifelong resident of Shelton in San Diego. In 2024, devastating floods destroyed my neighborhood and my family's homes within hours.

What had been a place of music, shared meals, and everyday life became unrecognizable. But what happened after the flood is why I'm here today. Even though more than 1,500 homes in our community were severely damaged, help was slow and families were largely left on their own. Insurance did not come close to covering the cost of rebuilding. Just recently, my father was notified that his flood insurance is being canceled.

My own home is still only partially rebuilt, and I'm carrying more death than ever. These floods didn't just damage buildings. They set families back generations. My father woke up at 4AM each morning for over thirty years to work as a concrete finisher for the county of San Diego. Building those homes was his dream, so his children and grandchildren could have stability.

Everything he worked for his entire life now lies in ruins. Earlier this year, when another flood threat came, the only help we were given was empty sandbags. Californians like me are paying the price for disasters we didn't create through canceled policies, rising costs, and displacements, while corporations that contributed to this crisis continue to profit. SB 982 is about fairness and accountability. It would create a way to stabilize recovery.

We're not asking for special treatment. We're asking for a system where families aren't left alone to absorb the cost of a crisis we did not create. I urge you to support SB 982, so families like mine can recover and stay insured in our communities. The choice is simple. Real support for Californians or more empty sandbags.

I'm Frances Moore. I'm a professor of environmental science and policy and the Health Department Presidential Chair at UC Davis. I'm an economist with over fifteen years experience working on climate change impacts and policy, including serving as a senior economist covering climate policy at the Council of Economic Advisors in the Biden administration. The world has delayed too long to reduce greenhouse gas emissions and the cost of climate change are now coming due.

Californians are paying those costs today in devastating wildfires and climbing electricity rates and insurance premiums.

Many factors have contributed to growing wildfire losses in the state, but it is undeniable that climate change has played an important role. Simply put, higher temperatures dry out vegetation faster, producing tinderbox conditions that drive the devastating conflagrations that we have seen in recent years. Funds to help the state manage climate costs are sorely needed. The state has a large and rapidly growing liability in the FAIR plan.

Intended only as a last resort insurer, the program has ballooned and now insures over 3 quarters of $1,000,000,000,000 in assets.

The FAIR program is not financially sound and its losses are ultimately backed by all policy holders in the state. When, not if, more climate change fueled disasters hit, all California policy holders will be on the hook for losses. Funds to California also has an urgent need to invest in home hardening and vegetation management. Fundamentally, this is the only way to way to lower wildfire risk and ultimately stabilize the California insurance market. These investments pay for themselves many times over but they are also costly.

Per household cost for wildfire resistant retrofitting range from tens of thousands to $100,000 far out of reach for most homeowners. Additional public costs in wildfire resiliency come from vegetation management and fuels treatment, An estimated cost to the state of between 25 and $43,000,000,000 California's taxpayers and policy holders cannot afford these costs alone. This bill would begin to raise much needed financing from the profits of the oil and gas industry.

It would do so without raising gas prices, a boogeyman argument from industry that I urge you to reject. Thank you for the opportunity to testify and for your support for this bill.

Thank you for your testimony. Alright. Are there individuals or or individuals representing organizations that would like to register support, for SB982? At this time, orderly fashion, please. Please come forward.

Approach the mic. State your name, affiliation, and position on the bill.

Hi. I'm Joy Chen with the Eaton Fires, Every Fire Survivors Network in support.

Sierra Coss, parent of two, PAGA member, proud cosponsor of VESP nine eight two.

Amanda Rosa, extreme weather survivors, proud parent and San Diego native, supporting nine eighty two.

Roberta Giordano, Sonoma County resident, proud supporter.

Melissa Eldridge, homeowner in Alameda County, proud supporter of this bill with extreme weather survivors. Thank you.

Raya Renaga, Eaton Canyon survivor, My Tribe Rise. We support this bill.

My name is Anna Karen Estrada. I'm a constituent of Senator Menjivar District in the San Fernando Valley, and I urge strong support for SB 982. Thank you. Molly Thompson, Sacramento County resident, speaking on behalf of three fifty Sacramento. And as an educator, I support this bill.

Thank you.

Jonathan Vang, resident of Central Valley, and I support this bill.

Bucky Montero, Shotown San Diego flood survivor, and I support this bill.

Alicia Reynaga from My Tribe Rise, and Eaton Canyon Fire survivor, and I support this bill.

My name is Mariah Williams. I'm a constituent of Senator Richardson, and I go to San Pedro High School. I'm a rising freshman at UCLA and a fellow for project Superbloom and a volunteer for California environmental voters, and I strongly support SB 92.

Hi. I'm Jocelyn Kumans. I get, constituents of Senator Laura Richardson. I'm a student at El Camino College, a fellow at Project Superbloom, a volunteer with California Environmental Voters, and I strongly support this bill.

Hi. I'm Alex Noel Gutierrez. I'm a student at CSU Fresno. I'm a youth ambassador with EnviroVoters, and my representative is Caballero. I support SB 982.

Hi. My name is Michaela Emani Golar Roberts. I'm a youth ambassador for California Environmental Voters and I'm also a student at University of the Pacific in Stockton, California and I strongly support this.

Hi, good afternoon. I'm a constituent of Laura Richardson. I'm a Compton leader, and, I'm in support of SB 982. Thank you.

Good afternoon. My name is Aaron Isaiah Diaz. I'm a constituent of Senator Richardson's district, and I am in support of nine eighty two.

Good afternoon. My name is Karen Jacques. I'm here on behalf of Climate Action California in strong support of this bill.

Hi. Jim Lindbergh on behalf of the Friends Committee on Legislation of California in strong support. Thank you.

My name is Kate Guadalupe Augustamante. I am a student of California State University, Dominguez Hills, Labor Studies Department, and Santa Ana College, alumni in Senator Umberg and member of California Environmental Voters. I support SB 982.

Hi. Good afternoon. My name is Alexandra Ortiz Avila. I'm a labor study student at California State University, Dominguez Hills, as well as an alumni from Sacramento City College. And I am in Senator Richardson's district and member of California environmental voters, and I strongly support SB 982.

Good afternoon. My name is Nicholas Hernandez, a former firefighter, constituent of Senator Menjivar, organizer with Extreme Weather Survivors, strong support of SB 982. Thank you.

Hi. I'm Rosanna Valverde. I'm an Eaton fire survivor here from Pasadena, California and a strong supporter of 982.

My name is John Cantu. I'm here from Willets, California. I'm a strong supporter of nine eighty two. Hi.

Hi. My name is Jessica Calix. I'm a flood survivor from San Diego, California, and I strongly support this bill.

Hi. My name is Chaga Calix. I am a flood survivor from San Diego, and vote yes.

Hi. My name is Claire Thompson. I'm an Eaton Fire survivor, and I strongly support this bill.

Hi. My name is Annie Ornaqian, Eaton Fire Survivor from Pasadena, California in support of SB 982.

Hi. My name is Ariana Standish, and I'm with Extreme Weather Survivors. I'm a renter in Oakland, and I support this bill.

Chris Myers with the California School Employees Association in strong support. Thank you.

Jenna Price on behalf of the Consumer Fed and support.

Kim Stone, Stone Advocacy, on behalf of Consumer Watchdog, in enthusiastic support.

Pahua, constituent of Senator Caballero, in support of SB 982, and also on behalf of Mollient Innovative Politics, San Francisco Bay Physician For Social Responsibility, Shell Town Resilience, Climate Action Campaign. Thank you.

Andres Escamilla, our proud cosponsor with California Environmental Voters in strong support along with Climate Positive Consulting, LA Voice, and Center for the Environment Environmental Health. Thank you.

Hello. My name is Raina Hickey from the Sierra Nevada, and I'm here on behalf of Green America, Optimus Drinks, Say Hat Action, and ACE in support of this bill. Thank you.

Hi. My name is Ashley Jackson, and I'm a constituent of Sabrina Cervantes' district, and I am in support of SB 982 on behalf of the Inland Coalition for Immigrant Justice, San Fernando Valley Climate Reality Project, doctor Bronner's and Dianuh, Jewish Call to Climate Action. Thank you.

Good afternoon. My name is Damon Blunt. I'm a Eaton Canyon survivor, and I'm in support of SB 982. Thank you.

Good afternoon. My name is Audra Blunt, thirty year Altadena resident and fire survivor, and I am in strong support of Bill nine eighty two.

Good afternoon. Ruth Sosa on behalf of Power California Action in strong support.

Good afternoon. Matteo Kushner, Community Water Center, and on behalf of Sierra Club California in support.

Portfolio Batterage Charger with housing California in support. Hello. I'm Ada Hernandez, fire survivor and from Altadena, California, and I'm here to support.

Hi. Good afternoon. Florence Henang from Pasadena's Organizing for Progress and for LA Voice in support.

Hello. My name is Jose Madera, born and raised in Pasadena, Altadena, director of the Pasadena Community Job Center and which is part of the National Day Labor Organizing Network and also part of the Dina Raise Up Coalition. Thank you and strong support.

Magda Molina, homeowner in Los Angeles, in strong support.

Hi. Nathan Prevost, Los Angeles resident, native California, in strong support.

Jane Lawton, Potel, fire survivor, the Eaton Fire, in strong support. Thank you.

Marquise Mason, not the Resource Defense Council. We haven't had a chance to look at the amendments, but we're a broadly supporter of the author's efforts, and keep up the great work. Thank you.

Eugene Flores, by the way of Cal State Dominguez Hills, Labor Studies Program, in strong support of the bill.

Matty Lopez, California Nurses Association in support.

Yvette Martinez, extreme weather survivors. And I'm also here on behalf of the Dolores Huerta Foundation voting yes. Thank you.

Mary Kriesman, CEO at California Environmental Voters, strong support.

Ellie Foreman, renter in California and proud union member in strong support.

Hi. Alyssa Ashwood, Palisades fire survivor in support, and thank you for your attention to this important matter.

Good. Thank you all for your testimony participation. At this time, we'll invite principal witnesses in opposition to the bill. Please approach. Thank you all for your testimony.

Afternoon and welcome. You'll each have two minutes. Please state your name for the record.

Good afternoon, mister chair. Chris Micheli on behalf of CJAC and a coalition of more than 60 organizations in strong opposition to both the bill in print as well as it is being proposed to be amended. I believe that this bill is creating a false narrative to benefit the fair plan and insurance payees, which you see in the bill is much broader than that. The reference to the fair plan and policyholders is including them but otherwise it is wide open. So what's really going on here?

California, a number of state and local jurisdictions around the country have sued the fossil fuel industry for alleged climate change damage. California, like those other jurisdictions so far have been unsuccessful. So what this bill is proposing is simple. It just imposes strict joint and several liability on the industry for all climate related damage, which we know is not attributable to only one industry. Talk about tipping the scales of justice.

Absolutely no due process. Basically, what this bill is doing is ensuring that the AG wins in something that they haven't been successful in in a court of law. By the way, there's a US Supreme Court case that has been granted cert. They are hearing arguments later this fall about whether or not these types of, cases can even be brought in state courts. For our coalition, nothing has changed even with the, three proposed amendments, which we haven't seen.

We've only heard about the same substantive concerns remain. In fact, this bill is probably worse with its unprecedented price controls. We don't have that in state law unless there are declared, emergencies. We are concerned for the entire business community because if one industry can be targeted like this bill does, what industry, is next? There is a discussion about elimination of retroactivity, and yet today's bill in print is wide open.

The 2016 date is only a statement of legislative intent. We had talked about in the previous committee due process concerns, commerce clause, preemption, takings, and others. This industry used to have 30 surprise. A colleague of mine described this bill as a WARN Act for the fossil fuel industry. You've got five years to get out of town.

Thank you. We ask for your no vote.

Thank you. Welcome.

Thank you, mister chair and members. Keith Dunn on behalf of the State Building Construction Trades Council. First, on the behalf of the men and women of the building trades, I want to acknowledge the devastation the families have experienced from recent fires and floods. Many of our members are all of often on the front lines clearing debris, restoring power, rebuilding critical infrastructure. We see the pain up close, and we share the urgency to act.

To that end, the building trades support effective climate policy. We have been at the table with this governor and this legislature actively supporting the renewal of cap and invest. We support reinvestment of those fees and clean infrastructure, hydrogen, transit, high speed rail, green resilient infrastructure systems that reduce emissions and support communities while also creating careers for Californians. We support a responsible transition to a renewable energy future. But we aren't here today to talk about a responsible energy policy.

I'm here to ask you to reject the false hope of an insurance bailout in one of economic destruction guaranteed should SB 982 become law. What's actually in print today is simple. It's a policy that accelerates job loss, guarantees litigation, and sets California on a path to an energy crisis. And to these yet to be seen amendments that were referenced by my colleague. I understand that September will now declare that 2032 is the year that a working class tax will be placed on every Californian.

Energy will no longer be produced in our state, and tens of thousands of my workers will lose their careers. The only benefactors of September in print or as proposed to be amended will be the lawyers who undoubtedly will litigate it for years. Amended or not, a vote for SB 982 will destabilize a legal critical industry that we need in our state. The consequences won't show up in a law review article or in an insurance manual.

It will show up in lost careers, vanishing tax bases for local communities, and as a bonus, rising food and fuel costs for every single Californian.

But, hey, maybe not until 2032. SB 982 is legally is not legally defensible or economically responsible. It failed its first committee just last week. The miraculous resurrection is a testament to the author's hard work, but these unseen amendments do nothing to assure that the consequences of passing in 2032 won't be born out sooner than later. Whether it's 2027 or 2032, a vote for SB 982 is a vote for a working class tax that all California families will pay.

We ask you to reject this bill today. Thank you.

Thank you very much for your testimony. We'll now invite individuals, individuals representing organizations to come forward to the mic, state your name, who are in opposition to the bill, come forward to the mic, state your name, and position. Welcome.

Nick Goodwin, business manager, plumbers, steam pitters. Look one five nine, and we oppose.

Good afternoon, Mr. Chair and members. Mike West with the State Building Trades, asked to express opposition on behalf of the California State Association of Electrical Workers, the California State Pipe Trades Council, and the Western States Council of Sheet Metal Workers. Thank you.

Jimmy Holland, business agent, Boilermakers Local 92, here representing 2,000 members in Southern California. We strongly oppose.

Willie Kunz, Director of Industrial Projects for the Southern California Pipe Trades, representing over 20,000 members, and we oppose this.

Ray Camacho, business agent, UA Local 250 Los Angeles, representing the working families of the LA County, in strong opposition of this bill.

Mr. Chair and members, Paul Deiro, representing the Western States Petroleum Association, in strong opposition.

Mike Hartley, Executive Director for the California State Pipe Trades. We oppose this bill.

Good afternoon. Derek Cole, International Brotherhood of Electrical Workers Local 302 and Contra Costa Building and Construction Trades Council. We stand in solidarity with the State Building Trades in strong opposition. Thank you.

Good afternoon, Chair and committee. Rachel Shoemake with IBEW Local 302, here representing over 1,300 electrical workers in Contra Costa County. We're in opposition, in solidarity with the State Building Trades.

Good afternoon, committee. Marc Lopez, assistant business manager, Local 342 Plumbers and Steamfitters, representing our members and pipe trades workers in Northern California. We strongly oppose this bill. Thank you.

Good afternoon. Bobby Rod, business representative of Local 342. We oppose this bill.

Good afternoon. Randy Thomas, business manager, Boilermakers Local 549 in Pittsburg, California, representing 1,000 boilermakers that work and live in these communities at these facilities, in opposition.

Hello. Anna Doyle, out of boiler-- I'm a boilermaker out of Local 549, and I strongly oppose this bill. Thank you.

Good afternoon. My name is Greg Everett. Boilermakers Local 549. I strongly oppose this bill.

Good afternoon, committee. My name is Doyle Radford Jr. I'm the business manager of Construction and General Laborers Local 185. We've been proudly building this community since 1929, including this building here, and we strong-- and we're opposed to this bill strongly. Thank you.

Hello, Chair and members of the committee. My name is Aureliano Ochoa, and I'm representing the Heat and Frost Insulators Local 16. We represent 48 counties in California, and we're standing strong with the State Building and Construction Trades in opposition. Thank you.

Clifton Wilson, on behalf of the Kern County Board of Supervisors, as well as the Western Propane Gas Association, both in respectful opposition. Thank you.

Good afternoon, members. Oracio Gonzales, on behalf of California's Business Roundtable, in opposition.

My name is Christian. I'm an ironworker, Local 378. Oppose.

Good afternoon. My name is Juan Luis Olivo, local-- Ironworker Local 378. I strongly oppose.

Hello. My name is Andres Yanez. I'm an ironworker, and I oppose this bill.

Francisco Yanez, vice president, organizer with Local 378, and I strongly oppose.

Good afternoon. Chris Shimoda, on behalf of the California Council for Environmental Economic Balance, in opposition.

Good afternoon, Chair and members. Skyler Wonnacott, on behalf of the California Business Properties Association, as well as the Building Owners and Managers Association of California and NAIOP California, in opposition.

Elizabeth Esquivel with the California Manufacturers and Technology Association, in opposition.

Good afternoon. James Thuerwachter with the California State Council of Laborers, also in opposition. Thank you.

Sarah Pollo Moo with the California Retailers Association, in opposition.

Jackie Onus, on behalf of the California Fuels & Convenience Alliance, respectfully opposed.

Good afternoon, Chair and members. Connor Gusman, on behalf of Teamsters California, in opposition. Thank you.

Good afternoon, Mr. Chair and members. Robert Moutrie, California Chamber of Commerce, opposed as a cost driver. Thank you.

Sara Flocks, California Federation of Labor Unions, joining the Building Trades in opposition.

Crystal Moreno, on behalf of the California-Nevada Conference of Operating Engineers, in opposition.

Do we have others that wanna state their opposition to the bill? Seeing no one coming forward, we'll bring it back to this side of the dais. Senator Richardson.

Well, since I think I had the most lion's share of constituents who came here, I wanted to speak--

I feel kinda left out.

We could-- we can fix that. I'm sure Mr. Wiener can fix that for you-- Senator Wiener. Let me just say to my constituents who are here present, my email is Laura, L-A-U-R-A, .richardson, R-I-C-H-A-R-D-S-O-N, @sen.ca.gov. I'm more than happy to meet with all of you on Saturday. We can meet at Cal State Dominguez Hills, and we can talk about this bill.

And I'm open to having that discussion with you. What I'm also, though-- I feel I have a responsibility to say is that I agree when the author stated, and many of you stated, that many entities, many industries, many individuals, frankly, have all contributed to the climate change and what we're seeing today. I also agree that there are not sufficient insurance options for people today who need insurance for their homes.

I further agree that even if a person can get insurance, insurance is very expensive, and a lot of people cannot afford it, which puts people in jeopardy of not being insured when something happens. I also agree that our current insurance situation is not sustainable, and finally, I also agree--and this is something we've had a discussion with the Chair and us as a caucus--the reason why I will not be supporting this bill today is because I don't believe SB 982 actually addresses the ultimate problem.

In my personal opinion, the problem is, when we have major disasters, whether it's an earthquake, whether it's a fire, whether it's a flood, all of those-- let me take a step back. Altadena and Palisades together, over 16,000 homes were destroyed. If you take that on an average block, 50 homes per block, that's over 350 blocks. There is no entity that estimates that they can cover recovery for 16,000 homes.

That is just not in the model of how someone projects how are they gonna provide insurance to a community. So in my humble opinion, I believe--and the reason why I asked to be on this committee and I wanna work on this committee is because I believe that insurance is intended to provide for the insurance. If I have an insurance claim on my home, if something happens, that's the purpose of the insurance.

But when things like happen-- happen with Palisades and Altadena, I believe the state-- we need to have a funding mechanism, and I believe that funding mechanism needs to be derived from all parties. Not one party, but all parties need to contribute.

We need to establish to have a fund so when a disaster happens, yes, Altadena can get all of the support that they so appropriately deserve because that was due to no fault of their own. And people should not be struggling about how can I rebuild, can I still have my home, and all of that. So I'm hoping that down the road, hopefully in the very near future as we get through these bills, we're gonna have an opportunity to discuss how to create a funding.

Senator Wiener is suggesting a funding mechanism. I'm simply saying I don't believe that this is the right one of how to do it. But I do agree that we need a funding mechanism so when emergencies occur, there is sufficient dollars to deal with the horrible disaster that people are facing. We should not leave Californians as they are. We, as legislators, have taken very hard pains to be able to pass money, to be able to have resources available to help, but there is still more that's gonna need to be done for both Altadena and Palisades.

And I agree 100% with that, and I'm prepared to work with all of you to achieve that. I just don't believe this suggestion of the funding mechanism is the right way to achieve it. So with that, I'm not supporting the bill. I've shared that with the author. This isn't something that he's not aware of of what my position is.

But for those of you who are in my district, if you'd like to meet with me, talk to me further, how I can be of additional support and consider additional ideas, all ideas should be considered on the table, and we need to work with. And I'm happy to meet with you this weekend when I return to the district. Also, I have a staff member who's here, Noah, with his yellow tie on. We'd be happy to take your name and number and email and to follow-up with you, and I will honor that commitment. Thank you.

Senator Menjivar.

Senator Richardson, I'd like to sell you another version of a fund I was looking to do with my own polluters pay, but we could talk about that after. But I--Senator Wiener, I have a couple questions, given that the amendments from your district were really late and, you know, it's always one of our complaints of the timeline and having to vote on things and absorbing everything. So, some questions. See if you or the supporters have the answers to this.

I'm just looking for further clarity on the emission reductions provision and what is gonna be eligible. I don't know if you envision this as companies reducing their own emissions on-site or a program like the offsets that they exist in Cap-and-Invest?

I'm gonna hand it off to Mr. Lovett in a moment, but I also-- in terms of the timing, you know, obviously, this was first heard in Judiciary last week which would have been a more regular process. It was-- it did not receive the votes and did receive reconsideration based on some proposed amendments. So, I-- obviously, ideally, we would have gotten this out a week ago. With that said, I'll turn it over to Mr. Lovett.

Thank you for your question, Senator Menjivar. So the amendments that were taken last night, they allow an entity to do emission reductions in either the offset way or in a way that is on-site within their own things. The important parts are that they meet a strict set of criteria: real, additional, quantifiable, permanent, verifiable, enforceable. That's the gold standard in terms of this and that they affect a overall drop in the emissions of the company.

Otherwise, it's a shell game and it isn't really helping on the problem because these provisions are made to be a fairness filter that allows the covered entities to defer some of their liability if they are reducing their contribution to the problem, but that contribution has to be real. There is not a requirement that they are in California specifically, but that could be done with careful drafting and other stakeholders. Just wasn't time yesterday.

Mr. Vice Chair, I have a couple follow-ups, if I can continue with the supporter here.

The floor is yours.

Thank you, Mr. Vice Chair. Because of the two options, and I know there's a clause that really prevents us from doing strictly just California, Cap-and-Invest does the direct environmental benefits--what is it called?--direct environmental benefit in state, the DEBS Program. Has that been included as a provision that if it is offsets, just like Cap-and-Invest, that there is a direct environmental impact project locally?

So these amendments do not include that and that wasn't offered up in the amendment negotiations between the author and other senators. I would have to look at it closer. I'm not a--

I wouldn't imagine this is a little bit more EJ focused. I don't think that kind of-- yeah.

Yeah. I would be happy to look at that. We'd be happy to look at it. Certainly could be possible. I think, though, that there is some danger in having a direct connection to the Cap-and-Trade Program because this is, you know, a line--

It's a guardrail that exists. I don't know. It's not a direct connection. It's just a guardrail that exists to make sure that the benefit has some kind of local benefit, I guess. Yeah.

Which absolutely makes sense on all sorts of levels, and I believe the author would be willing to consider working on that.

Yeah. We would be happy to. Of course, CARB is currently proposing to destroy Cap-and-Invest, so hopefully that--

I think that's another-- yeah.

Yeah. Hopefully that won't happen. Hopefully, CARB will not destroy Cap-and-Invest, which will have devastating consequences in California.

Senator Wiener, this next question is a little bit out of the preview, but since you're presenting here, it's our opportunity to ask questions. There is-- for the determination of value of the emission reduction, how is the core gonna determine that actual value? Or how do you anticipate that to be determined?

It will be determined by the core, and presume-- I would-- it would be expert testimony in terms of what the value of the emission reductions would be. And so there are extra methodologies for--

That aren't included in the bill? They will have those?

Yeah. I mean, if the bill advances today, then obviously, there are things that can be flushed out going forward, but this will be-- and we wanna make sure it's something that the court can apply, but I presume that there would be expert testimony about methodologies to calculate the value of emissions reductions.

And in the greater conversations with all the bills that we're seeing in this committee, a thought also came up where I believe we should-- I'm a strong believer of making polluters pay, and everyone has a part of paying. Taxpayers are paying for it, so it should be a fair share.

But I also believe if an area burns, they have the ability-- you know, they should recuperate some of the funding, but if they-- if rebuilding continues to happen in the same place over and over again, at some point, it can't just be on the polluters or making sure that the Attorney General sues. We gotta stop building in that area. I know you're in the grander, greater scheme of building everywhere, Senator Wiener. There also has-- almost everywhere.

Not everywhere.

There should be-- also be a thought of if we're allowing the ability to file a lawsuit and if it's in the same place over and over again.

Yeah. And we also need-- we have modern building codes and fire standards where we see in communities that do burn, the newer buildings built to the higher standards are much less likely to burn, so that is also incredibly important.

I know there was a conversation after the LA fires of trying to, like, relax some of those building standards to make it more affordable to rebuild, which is-- even though I'm sympathetic to people wanting to make it more affordable, it makes no sense to relax those safety codes because we know that that building is built to the higher standard with the building materials and the defensible space and the right ingress-- like, it means less risk, so--

Yeah. I mean, and Malibu continues to catch on fire and I think the home-hardening is not--

Yeah. And there are some areas where we shouldn't build.

Yeah. Yeah. Okay. That-- those were my-- I just needed clarity, and I know you'll continue, and I shared with you. I just wanna make sure as you're balancing requests from some of your colleagues and then some of your other EJ colleagues is that there's actual direct benefit to the local community.

If the bill advances today, we absolutely welcome those conversations.

Thank you, Senator.

Senator Becker, and now I'll turn the gavel back over to our Chair.

Sure. I'll start with a few questions and then come back. I mean, I appreciate your efforts in this area, right? And there's no question that-- obviously, you know, the burning fossil fuels, you know, we didn't have-- we had a fire, you know, couple months and now we have year around fire risk, and of course the Altadena Palisades fires happened, you know, in January, which was unimaginable.

So we now have your-- you know, a lot of my work here in the Legislature is now reacting to that as Chair of Natural Resources, you know, three bills on wildfire. Hear insurance. We're always trying to cover this.

So much of our work now is trying to deal with the fallout from these disasters and try to prevent future disasters and make sure we're funding CAL FIRE, make sure we're funding Air Resources, make sure we're funding the, you know, billions of dollars into, you know, kind of brush clean up, and home-hardening, and all these things.

So, you know, it sort of left us that legacy that, you know, takes up a lot of our work here now to deal with this. I mean, I did wanna ask you, I mean, when you have polluters pay, we have Cap-and-Trade. Polluters-- or Cap-and-Invest. Polluters are paying for that. So how do you respond? Is that just gonna be an additional fee on the same people? I mean, how do you think about that?

Well, two things. In terms of polluters pay that-- Senator Menjivar had that bill, and that is a much broader approach than this, so this is focused on one specific industry's fueling of disasters that create a very specific harm, whereas the polluters pay concept is a much broader array of industries that are polluting, creating a fund to deal with a much broader array of impacts.

So what we're proposing here is that you have one industry that has a particular product that has fueled particular kinds of disasters that are creating specific harms to policyholders in the FAIR Plan, and they should have to help pay for that and not just dump it all on taxpayers and policyholders. And--

Will that ultimately be the same? I mean, a lot of the same firms who are contributing a lot to-- paying a lot for big percentage of the Cap-and-Invest dollars as well, or how--

Well, Cap-and-Invest is-- and I-- again, I wanted to say, again, CARB is proposing to destroy the program. I just can't say that enough, and so I hope CARB does not do that. But Cap-and-Invest is also about climate-- is about climate mitigation, right, whether it's clean energy programs, or decarbonization programs, or public transportation and so forth, and that is very, very important and that is also profoundly broader than what we're dealing with here. I think the two are complementary.