SACRAMENTO — The California Supreme Court refused Wednesday to consider the insurance industry’s challenge to a new state law that gives thousands of Northridge earthquake victims a year to refile their claims.
The court’s action left open the possibility that the coalition of insurers, who say the law is unconstitutional, will pursue the case at a lower court before Jan. 1, when the statute takes effect.
The law, authored by Senate leader John Burton, D-San Francisco, was prompted by disclosures this summer that studies, called market conduct exams, by state Insurance Department auditors turned up hundreds of alleged claims-handling violations on the part of Northridge quake insurers.
The January 1994 earthquake killed dozens of people and caused some $15.3 billion in insured losses.
More than 600,000 claims were filed in connection with the quake; most have been settled, and insurers have denied they mishandled claims.
Burton and consumer groups said there were cases in which insurers low-balled claims, delayed settlements and provided inaccurate or incomplete information to policyholders.
The new law is intended to give the quake victims who were unhappy with their insurance company’s action a year to resubmit their claims.
People whose claims were settled with the help of a lawyer or whose settlements were approved by a judge are not allowed to refile claims.
The insurance industry coalition – three major trade associations and a Los Angeles-based company – filed the challenge last week directly with the high court in hopes of obtaining a decision before the law takes effect.
Ellis Horovitz, an attorney for the insurers, said going directly to the Supreme Court “was seen as a quick and efficient way of having this overriding issue determined as quickly as possible.
“But they turned it down, and we still have the option of raising it in the trial court,” Horovitz said.
Insurers said the core issue was their contention that the law is unconstitutional because it retroactively voids contracts and could enable hundreds of thousands of people to resubmit damage claims.
Burton and supporters of the law said it applied to only about 4,000 to 12,000 policyholders.
Doug Heller, a spokesman for the Santa Monica-based Foundation for Taxpayer and Consumer Rights, said the Supreme Court’s refusal to hear the case means “insurers aren’t going to be able to bully their way out of accountability.”
“The court is saying, ’We have no business undoing this law and there is not a constitutional crisis,”’ Heller added.