| Citizen Communications to California Government |
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Homeowners Victimized by CHUBB-CAI Lawyers Ask California State Insurance Committee for Investigation, Legislation and Restitution
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from
AHRC News Services
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| December 19, 2000 Senator Jackie Speier, Chair California Senate Insurance Committee State of California 2032 Capitol Building Sacramento, California 95814 Re: Directors & Officers (D&O) Insurance in homeowner associations Request for Investigations & Legislation & Restitution to Association Homeowner Victims Dear Senator Speier: In 1993, we contacted your office through Brian Perkins to reverse AB 879 in order to help stem the litigation tide and roll back the massive assessments being levied against homeowners. AB879 was passed to benefit theCAI lawsuit industry so that homeowner reserves could be used by lawyers to sue builders, and unlimited special assessments could be charged to homeowners to replenish those reserves. You introduced AB 1317. While there were significant deletions during its passage through the legislature, you were able to preserve some features of the bill and secure its passage. Despite its passage, significant problems continued to exist in homeowner associations. As we investigated the cause of these problems over the next several years, our research and analysis repeatedly led us back to a central source – the insurance mandated by state legislation. We discovered two central pieces of information. First, as we have detailed in prior communications to you, this state mandated insurance was being used as a sword against homeowners, not as a shield. It is making possible – and even encouraging – boards to violate the CCR’s, state laws and fundamental constitutional rights. Furthermore, it enabled boards to arbitrarily and discriminatorily attack homeowners who opposed board policies and corruption. In California and nationwide we can provide you with witnesses who will testify that lawyers, boards and management companies defraud and abuse homeowners to manufacture lawsuits to milk the policy and take peoples' homes and savings. Second, we unearthed the fact that one insurance company – Chubb Insurance – had a monopoly (over 80% of the market) in the homeowner association insurance business. We discovered that it had achieved this monopoly by a marketing strategy that promised boards that it would provide a "duty to defend" them for past, present or future actions – no matter what they were. In addition, Chubb bribed boards to purchase their insurance policies by promising them $100,000 in Accidental Death and Dismemberment Insurance for only $100 a year. Chubb also bribed association service managers to sell Chubb to associations by promising to cover these service managers for a nominal fee – to be paid by the homeowners, of course. Over and over agian, we found CHUBB would step in when other insurance companies like CNA and Farmers drop D&O for board members who create litigation by violataing their own CCRs and laws. The net effect of the above is that homeowners are left defenseless against the combined forces of a multi-billion dollar insurance company and a ruthless HOA litigation industry only too eager to cash in on it. If a homeowner files a suit to correct a wrong – and boards are only to eager to say "sue us" – he faces not only the vast powers of insurance defense law firms, but also the prospect of staggering legal fees in the event of losing – not to mention the hundreds of thousands for his own legal costs. Each homeowner faces the likelihood of losing his own home in the process. Homeowners are trapped in the entrails of this insurance/lawsuit scam. All of this is made possible only because the Governor Gray Davis(D) while in the California legislature, at the behest of the coalition of insurance companies, lawyers, builders, service managers and other vendors passed the Davis Stirling Act . HOMEOWNERS DID NOT ASK FOR HOMEOWNER ASSOCIATIONS. GRAY DAVIS FORCED IT UPON THEM. This legislation has created great wealth for insurance companies and lawyers and produced massive campaign contributions for politicians. This has all come at the expense of the homeowners. As the state legislature created this unjust and inequitable superstructure of laws, it is the responsibility of the very same legislature to undo the harm which it has caused. The harm has been so great that in Texas, where similar legislation has been passed BY GOVERNOR GEORGE BUSH JR. (R), now the U.S. President Elect, the Texas Property Rights Foundation reports that the ACLU is l intervening on behalf of homeowners. As the insurance mandated by the California legislature plays such a pivotal role in this entire process, it is imperative that the Senate Insurance Committee, which you chair, hold hearings on this matter. When we contacted you 2 years ago in 1998, you told us , through Brian Perkins, that you would try to hold hearings and that for a variety of reasons, you had to delay it by several months. Brian said you'd probably hold hearings in August of 2000, but when that date came around, the hearing decision was delayed till December because you were involved in the the removal of the corrupt Insurance Commissioner Chuck Quackenbush (R) for defrauding homeowners during the Northridge earthquake. (One of the essential things Quackenbush did was allowing insurance companies to avoid billions in fines if they make contributions to his private foundation.) Your assistant later called us and said that you would contact us by phone while you were attending the Democratic Convention in Los Angeles in August. We did not hear from you. Brian then told us yesterday you may not hold hearings on the insurance issue, but will consider introducing a bill licensing managers. CACM, the managers lobby group founded recently by CAI lawyers and managers, had introduced a licensing bill in the last session. Their motive was clear. They wanted to control the certification process so they could contine to reap the millions in "training seminars". Homeowners report that these sessions are simply "how-to-sue-homeowners" training sessions. (We understand that you will be holding 3 insurance hearings in January dealing with the prescriptions for the elderly and insurance for children. While these are important, we note that these are all areas where insurance companies stand to make money. Furthermore, if these people lose their homes, what is the use of health insurance ?) Legislating on the margins will simply not solve the fundamental problems of homeowner associations. As the legislature created the nightmare of homeowner associations, it is the responsibility of the legislature to correct its errors. Homeowner association legislation in one fell swoop wiped out fundamental property rights, decimated savings and hung the damoclean sword of foreclosure over each homeowner’s head. Nothing of value will be achieved unless the state mandated insurance – the financial muscle behind so many of the current abuses – is reformed. The 6 million Californians living in associations have a right to that reform. They look to you as chair of the Senate Insurance Committee to lead that reform. We recognize that powerful economic interests will not be happy at such hearings, but you were elected by the people, not those special interests. Chubb and CAI have banded together to form a de facto government on a nationwide basis over the 42 million Americans who live in homeowner associations forced by state legislators to pay millions in insurance premiums. Millions are then used by Chubb - CAI to keep homeowners in servile compliance while CHUBB-CAI litigates against them and snatches their homes and savings. Courts are inundated with lawsuits. Last year in California alone, the Judicial Council reported that 9 million lawsuits were filed – and California has only 35 million people. Homeowners need the following legislation immediately : 1. Require the vote of a majority of homeowners before D&O insurance is purchased . This would not only cut down on lawsuits, but it would be an incentive for boards to follow CCR’s, state and federal laws. 2. Prohibit insurance companies from defending boards when they violate the CCRs and state and federal laws. 3. Prohibit the use of homeowner dues to defend boards when they violate the CCRs and state and federal laws. 4. Require insurance companies to refund, retroactively, to all homeowners all the legal fees and costs homeowners were forced to incur when the insurance and association lawyers and managers misuse the D& O policy by covering intentional acts. 5. Require insurance companies to make restitution, retroactively, to all homeowners for all the damages they have suffered. (Homeowners will testify that they have lost homes, spouses; that insurance defense lawyers have destroyed the childhood of thousands of children and the peace and tranquility which every citizen is entitled to. As the California legislature mandated D&O insurance in homeowner associations, it should either scrap this requirement altogether, or regulate it with a citizen oversight committee. Lawyers, insurance companies, judges and allied vendors should not be allowed to use the billions of dollars of state- mandated premiums from homeowners to litigate against these homeowners and take their life savings and homes. As the chair of the Senate Insurance Committee you have a special responsibility to protect the public from insurance abuse. The well-being of 6 million Californians is in your hands. Thank you for your attention. Sincerely Elizabeth J. McMahon - Director American Homeowners Resource P.S. At the request of your office we have will get to you a list the CHUBB Insurance lawsuits in California and nationwide within the next thirty days. |
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American Homeowners Resource Center
P.O. Box 97 * San Juan Capistrano California 92693 Phone: (949) 366-2125 * E-mail:ahrc@ahrc.com © 1990-2000, AHRC News Services |