Calif. Commissioner Floats Emergency CLUE Regs

By Gary Mogel

NU Online News Service, July 3, 4:05 p.m. EDT?Commissioner John Garamendi of California has sent proposed emergency regulations to the state Office of Administrative Law restricting insurers use of the CLUE data bank listing damage claims by homeowners.

The OAL has 10 days to approve or disapprove the regulations affecting CLUE (Comprehensive Loss Underwriting Exchange) reports by insurers. If they are disapproved, the Department of Insurance would be given an opportunity to amend the new rules and resubmit them, according department spokesperson Julie Lucero.

Under the proposed regulations, if a CLUE report is used, the insurer must perform an independent verification of the reported loss and investigate whether the loss was remediated. The insurer would also have to determine whether the loss continues to be an accurate and significant predictor of future losses.

CLUE reports are used by homeowners insurers to determine what prior claims or inquiries about claims have been made in connection with a specific home.

Mr. Garamendi pointed out, in a statement issued in connection with the proposed regulations, that the Department has received "voluminous" consumer complaints stating that they were denied coverage or charged very high premiums because they had claims or made claim inquiries that were placed in the CLUE database. There has also been a problem with correcting erroneous data in these reports, he added.

Sam Sorich, president of the Association of California Insurance Companies in Sacramento, sees two major problems with the emergency regulations.

"The first thing is that there is no emergency," said Mr. Sorich. "Homeowners insurance is readily available in California at rates approved by the Department of Insurance. The commissioner should go through the normal regulatory process."

"Secondly, there is a question as to the commissioner's underlying authority to do this at all," Mr. Sorich continued. "Under California law, insurers are allowed to use reliable, credible data to make underwriting decisions."

Mr. Sorich added that the commissioner appears to be using the emergency regulations to "trump" a lawsuit filed in April challenging his authority to regulate the use of CLUE reports.

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