A consumer advocate and a building lobbyist walk onto a Southwest flight from Los Angeles to Sacramento.
By Christopher Cadelago and Camille Von Kaenel, POLITICO
https://www.politico.com/news/2023/08/31/california-wildfires-insurance-risk-00113563
SACRAMENTO, Calif. — A timely warning to lobbyists: Be careful of eavesdroppers — particularly in the waning days of the legislative session at the California state Capitol.
The latest episode transpired last week on a morning Southwest flight from Los Angeles to Sacramento. The topic? A late-session push from insurers, home builders and the state’s insurance commissioner to allow rates to rise in exchange for carriers staying in California.
While passengers sipped weak coffee, the hard-charging consumer advocate Jamie Court spotted longtime insurance and building industry lobbyist Michael Gunning, who represents home and condo builders. The ensuing events — part “Seinfeld,” part “Burn Notice” — vividly illustrate not only the last-minute maneuvering that happens behind the scenes but also how major players discuss it in private, and the lengths to which some will go to try and smoke it out.
On the plane, Court told POLITICO, he heard Gunning talking about Dan Dunmoyer, the California Building Industry Association leader who spent years lobbying for insurers, and his ears perked up. Court, the longtime president of the nonprofit Consumer Watchdog, pulled out his phone and started recording Gunning’s conversation.
“So we are trying to jam a bill in the last three weeks of the year,” Gunning, chief strategy officer at Lighthouse Public Affairs, said at the start of Court’s recording.
Gunning went on to explain the precarious situation for insurers: State Farm is not writing new policies. Allstate stopped a while ago, and Farmers said they were limiting their new policies.
Gunning described the push to craft a remedy as “the surprise you don’t know about … That’s always the fun thing that comes up: ‘Where did that come from?’”
Insurance Commissioner Ricardo Lara, Gov. Gavin Newsom’s staff, lawmakers and industry leaders have been in talks for weeks about an insurance deal before the end of the session on Sept. 15, but have not yet released bill language.
A draft bill framework put together by a small group of Assembly Democrats last week and obtained by POLITICO would allow insurers to write the predicted costs of climate change-fueled disasters into their rates as long as they committed to increasing their presence in disaster-prone areas to at least 85 percent of their market share elsewhere in the state.
Another proposal pushed by the Building Industry Association, Gunning’s former employer, would require the state’s last-resort insurer to increase its limits to cover condominiums. The proposal, dated July 28, would also create a backstop mechanism to charge all policyholders a small fee to bail out the last-resort insurer if it goes bankrupt because of all the fire risk it is taking on.
Dunmoyer said Wednesday he hadn’t yet found a lawmaker who would carry his bill, but expected the proposal on condos to be included in a broader deal.
A familiar face around the Capitol, Gunning spent 17 years at the Personal Insurance Federation of California. He went on to work for the Building Industry Association, and has served on many boards and commissions, including as a Newsom appointee last year to the state teachers’ retirement board.
During the airplane chat, another person suggested the insurance bill will be a “gut and amend,” a process where old bill language is removed and replaced with new bill language.
Another voice added that the last three weeks of the session are “always about something.”
“But it gets done,” Gunning said.
Court said the conversation was proof that lawmakers and industry vets are up to something deeply suspicious: “It’s a bailout,” Court said. “And we don’t need a bailout.”
Court went on to suggest that Gunning’s use of “jam” was “offensive.”
“This is exactly why the governor and the legislature should not do this eleventh-hour deal, because the very process of it is offensive,” he said. “The only reason they’re doing it this way is because they know they can’t get it through in the light of day.”
A deal could pose a direct threat to Court and his Consumer Watchdog group, which takes considerable flak from political opponents who view it as a gadfly in the insurance rate-setting process. Consumer Watchdog has threatened to sue over any effort to weaken ratepayer protections it enshrined as part of voter-approved Proposition 103 in 1988.
The elevation this week of Sen. Mike McGuire (D-Healdsburg) as the state Senate’s next leader could change end-of-session political calculations. McGuire has opened an account to run for insurance commissioner in 2026 and represents a region with frequent wildfires. He proposed a bill earlier this year that would have required insurers to cover property owners that improve their homes’ resistance to fire, even in risky areas.
The group of Assembly Democrats also want to force insurers to grant greater discounts to people who make their homes and communities more fire-resistant, according to an aide POLITICO agreed not to name because the talks are ongoing.
Reached for comment Wednesday, Gunning said he had no idea Court was on the same flight and that he was quite “mad” about being recorded without his knowledge. Court’s response: “He shouldn’t have been boasting in front of an open plane.”
Gunning also suggested that his “jam” description was taken out of context.
“The context was about insurance, but it was really how all these [bills] get done at the end of session,” Gunning said. He wanted it known that he wasn’t “talking about insurance ‘jamming in’ the governor or the legislature jamming through an insurance deal.”
Similarly, he contended, his mention of “surprise” wasn’t about an unsuspecting public — as Court alleged — but about the legislative deadline and how it spurs a flurry of late action.
“No matter what, there’s always a surprise issue at the end of session that comes up and I’m fascinated by whatever that is,” Gunning said.