Around the PIA Western Alliance States – Week of July 29, 2024

Alaska — Work Comp & the Alaska Supreme Court: Samuel Amos was helping a friend build an outbuilding when he fell 18 feet from a roof and sustained serious injuries. He filed a claim with the Workers’ Compensation Benefits Guaranty Fund and against his friend David Tidwell.

He was given workers’ compensation benefits based on the claim. However, Tidwell appealed the decision and said Amos was not an employee and is not entitled to benefits.

The Alaska Supreme Court ruled for Tidwell last week that the Alaska Workers’ Compensation Commission exceeded its authority by creating a buddies exception.

Amos, the court said, is an employee of Tidwell and therefore is not entitled to benefits.

California — Work Comp Benchmark Rate: Insurance Commissioner Ricardo Lara adopted and issued a new and decreased rate for workers’ compensation insurance that reflects California’s growing economy. The Commissioner’s action lowers the annual benchmark rate from currently $1.41 to $1.38 per $100 of payroll for workers’ compensation insurance — representing a 2.1 percent decrease from last year — which will go into effect on September 1, 2024.

Key factors in the Commissioner’s decision include the continuing decrease in the number of medical services associated with each workers’ compensation claim, and a continuing decline in the percentage of claims with permanent disability benefits. After considering the healthy state of the workers’ compensation market, overall economic conditions, and his staff’s actuarial projections concerning long-term and short-term trends, Commissioner Lara concluded that a reduction in the average pure premium rate is reasonable and appropriate at this time.

The Workers’ Compensation Insurance Rating Bureau of California’s (WCIRB) September 1, 2024 Pure Premium Rate Filing includes COVID-19 experience in the portion of the projection that is developed from accident year 2023. Beginning with accident year 2023, COVID-19 experience will no longer be excluded from consideration when setting rates. In addition, the Commissioner notes the concerns raised by the WCIRB and Bickmore, the WCIRB Governing Committee public members’ actuary, regarding recent large increases in litigation and other claim expenses and looks forward to the WCIRB further investigating potential causes for these cost increases.

Commissioner Lara’s decision results in an average advisory pure premium rate that is below the $1.42 average rate proposed by the WCIRB in its filing with the California Department of Insurance. Commissioner Lara issued today’s advisory rate after a virtual public hearing held on June 6, 2024, and careful review of the testimony and evidence submitted by stakeholders.

The Commissioner’s recommended rate is based on insurance companies’ cost data, trends, and recommendations made to him by the Department’s workers’ compensation experts. The pure premium rate is only advisory, as the Commissioner does not have statutory rate setting authority over workers’ compensation rates. The average advisory pure premium rate level of $1.38 approved by the Commissioner is about 21.1 percent lower than the industry-filed average pure premium rate of $1.75 as of January 1, 2024.

California — The Park Fire: Insurance Commissioner Ricardo Lara reminds residents in Butte, Tehama, and Shasta counties who have been ordered to evacuate due to the Park Fire that their homeowners or renters insurance may help with evacuation and relocation costs under Additional Living Expenses coverage, known as ALE. ALE coverage typically includes food and housing costs, furniture rental, relocation and storage, and extra transportation expenses, among other costs. The Park Fire is now the sixth largest in California history.

Commissioner Lara also announced an impending action to protect insurance for residents living within the perimeter of the Park Fire and surrounding areas, following Governor Newsom’s emergency declaration on July 26. Under state law, once the fire’s perimeter is determined by the California Department of Forestry and Fire Protection (CAL FIRE) in consultation with the Governor's Office of Emergency Services, Commissioner Lara will issue a Bulletin identifying ZIP codes that will be subject to a one-year protection from homeowners’ insurance non-renewal or cancellation due to wildfire risk. Commissioner Lara has protected insurance for more than 4 million Californians since 2019.

“Wildfires are devastating both financially and emotionally, even if you don’t suffer property damage,” said Insurance Commissioner Ricardo Lara. “Insurance benefits can help people recover quickly and cover some of the additional costs if you have to evacuate from your home. Once this fire is brought under control, we will be on the ground assisting survivors in person, enforcing California’s strong consumer protection laws as people recover.”

If you have any questions or need assistance, the California Department of Insurance is here to help. Please call: 1-800-927-4357 or visit www.insurance.ca.gov.

Many homeowners are unaware that they may have coverage under their homeowners and renters insurance policies to help them with evacuation and recovery expenses.

In 2020, Commissioner Lara sponsored a new law — SB 872 authored by Senator Bill Dodd — that requires insurance companies pay at least two weeks of ALE benefits to evacuees and provide an advance payment for no less than four months of ALE without an itemized inventory form, among other consumer protections. This important consumer protection law removes barriers for disaster survivors to get critical insurance benefits and streamlines wildfire recovery processes for homeowners who suffer from a loss.

Here are some additional tips for consumers:

• Keep all receipts during your evacuation.
• Policy provisions, including deductibles, vary by company, and residents should check with their insurance company or agent as soon as possible to confirm coverage, limits, and any other limitations and documentation requirements. Most renter’s policies also typically include ALE coverage.
• Document the date, time and names of any insurance company employees you speak to regarding your coverage.
• Consumers should make sure any insurance agent or public adjuster offering their services has a valid license by checking online with the Department of Insurance.
• Download the Department’s Top 10 Tips for Wildfire Claimants (also available in Spanish), which includes information about claiming ALE benefits.
• Public adjusters cannot solicit business for seven calendar days after the disaster.
• Don't forget copies of insurance policies, important papers, and a photo or video inventory of your possessions. An inventory can be completed quickly and easily on your smart phone and safely stored in the Cloud.

Washington — Kreidler urges caution to homeowners offered an assignment of benefits: Washington state Insurance Commissioner Mike Kreidler urges homeowners to make sure they have all the necessary information before signing a post-claim assignment of benefits agreement.

An assignment of benefits (AOB) is a contract between a homeowner and a third party that transfers the insurance claim rights and/or benefits in an insurance policy to the third party. This allows the third party — typically a contractor, plumber, roofer or other construction professional — to file the claim, make decisions about home repairs and collect insurance payments without involving the homeowner.

You are not required to enter an AOB with a third party to have repairs done; you can file a claim directly with your insurance company.

“An assignment of benefits, in the right hands, can be an advantage to homeowners recovering from a devastating loss,” Kreidler said. “Unfortunately, it can also result in people losing their rights and their ability to make decisions in the claims process, and their ability to determine how they’re made whole after a loss.”

What happens when you sign an AOB

When a homeowner signs an AOB, they pay the deductible to the third party, who then makes repair decisions, does the work, and receives payment directly from the insurance company. In ideal circumstances, this saves the homeowner the time involved in documenting the claim and tracking their correspondence with the insurance company.

AOBs, however, can present problems for Washington homeowners.

    Once it’s signed, the insurance company only communicates with the third party. The third party can sue your insurance company and you can lose your right to mediation.

    The legally binding contracts usually don’t include a right of recession or a cooling-off period — a brief window after signing during which the homeowner can change their mind and cancel the agreement. This means that an AOB may be very difficult to cancel, even if there are conflicts between you and the third party.

    If the third party’s initial estimate of damage doesn’t match up with the insurance company’s valuation of the claim, the third party must repair the home within the budget allotted by the insurance company or negotiate with the company. Repairs may be delayed while the third party negotiates the claim payment.

    The third party may demand a higher claim payment than your insurance company offers and then sue the insurance company when it denies your claim. A lawsuit could cause a years-long delay in repairs and the homeowner could have no say in the proceedings.

    In some worst-case consumer experiences with AOBs, out-of-state contractors, roofers or water-extraction specialists have arrived in regions recovering from natural disasters, entered AOBs with multiple homeowners, received the initial actual cash value checks from insurance companies and left without completing any repairs. These unscrupulous professionals may also cut corners in repairs to obtain a profit or artificially inflate their estimates to improperly increase the insurance claim payments.

    If a contractor with an AOB unreasonably delays repairs, the insurance company could cut off temporary housing payments if it had reason to expect the home should have been repaired by that time. Homeowners who have suffered a property loss should be cautious and understand what an AOB agreement is before entering into one.

More information

The National Association of Insurance Commissioners (NAIC) offers additional information to help you better understand insurance, your risk and what to do in the event you need repairs after a claim.

Washington — Kreidler fines LifeTime Home Warranty $200,000 for unauthorized business and refusing claims without just cause: Washington state Insurance Commissioner Mike Kreidler issued a cease-and-desist order and fined LifeTime Home Warranty LLC $200,000 for acting as an unauthorized insurer, refusing claims without just cause and failing to respond to the insurance commissioner’s inquiries.

The order, filed July 25, 2024, bars LifeTime from transacting insurance business or acting as a service contract provider in Washington state.

LifeTime sold home appliance service contracts in Washington without first registering with the Office of the Insurance Commissioner, refused claims and services without just cause and failed to respond to multiple inquiries from the OIC. LifeTime’s contracts claimed to cover the costs of repair and replacement, or maintenance, for consumers’ household appliances.

“My office takes consumer protection seriously,” Kreidler said. “Washington residents should be able to receive the services they’ve paid for. If a company fails to provide it, we will hold them accountable.”

Washington — OIC Answers podcast: Why is MY car insurance getting more expensive?

Auto insurance rates took a jump in 2023, which meant an increase in monthly costs for people almost everywhere. What happened? Was it a Washington-specific issue? Why doesn’t the Insurance Commissioner just say “no” to rate increases? And why did MY costs go up when I haven’t even wrecked a car or gotten a ticket in years?

On this episode of the OIC Answers podcast, Senior Policy Advisor David Forte helps the hosts address all the questions and theories they’ve heard about auto rates over the last year.

Listen on Apple Podcasts — https://bit.ly/46sfMKO

Listen on Spotify — https://bit.ly/3Xkuv85