Garamendi Bill Of Rights Sparks Trade Group Ire

Joseph Annotti, a spokesperson for the NAII said vagueness in the wording could result in an economic burden for insurers.

Mr. Garamendi, in a statement, said he had a growing number of formal complaints from homeowners unable to find affordable insurance or who are denied coverage altogether based on information insurers report to the electronic loss databases, including C.L.U.E. (operated by Alpharetta, Ga.-based ChoicePoint) and A-PLUS (the Automated Property Loss Underwriting System database, maintained by the Insurance Services Office).

In reaction, he said he has put out the advisory to tell insurers they should "review and follow law when using loss or claims history to determine a homeowner's eligibility for coverage."

Mr. Annotti said the NAII objected to the portion of the advisory stating that, "personal information, such as loss history data, obtained from insurance-support organizations, such as claims database vendors, may not be the basis, in whole or in part, for an adverse underwriting decision."

It states further that an insurer "or agent may base an adverse underwriting decision on further personal information obtained as the result of information received from such insurance-support organization."

By the NAII's reading, this "may require having to do an inspection of every home before you insure," said Mr. Annotti. "Do you know how much that would cost?" he asked in a dismayed tone of voice.

Mr. Garamendi's advisory also states that insurers should maintain eligibility guidelines for every line of insurance offered for sale to the public and they should be "sufficiently detailed to determine the appropriate rating plan for the insured."

Mr. Garamendi's announcement of the advisory said in many cases his department has found information recorded by an insurer that was incorrect, erroneous, or questionably related to the risk of future loss.

The effect, he said, has been expensive premiums and unjustified denials of coverage.

His advisory states that insurers must be able to demonstrate each loss utilized in determining eligibility bears "a substantial relationship to risk of future loss" and must be evaluated to determine if the loss is evidence of increased risk of future loss.

Mr. Garamendi said future elements of his Homeowner's Bill of Rights program involve sponsoring legislation that will strengthen consumer protection with a ban on credit scoring in underwriting and programs to educate consumers about title and mortgage guarantee insurance.

Mr. Annotti said the NAII might consider "other regulatory and legal action" to stop implementation of the advisory.