Thursday marks the beginning of summer, but early wildfires have already scorched the outskirts of L.A. and the Bay Area. Many California homeowners find themselves more vulnerable than ever as major insurers abandon areas threatened by climate change-fueled fires. Gov. Gavin Newsom and state Insurance Commissioner Ricardo Lara have responded with efforts to ease regulations and boost coverage.

Insurance industry representative Rex Frazier argues that state leaders have the right idea: Burdensome regulations are making a difficult situation worse. But consumer advocate Jamie Court contends that the state needs to take a harder line by requiring coverage of homeowners who meet fire protection standards.

California’s sclerotic insurance bureaucracy isn’t helping anyone

By Rex Frazier

As the leader of an association of homeowners’ insurers, I frequently hear from anxious Californians who are losing their coverage and wondering whether the situation will get better. My answer is that I am not one of those who believes California is facing an uninsurable future. The problems we face are difficult but solvable.

The insurance challenges the state is facing today have roots in the past. While the giant wildfires of 2017 and 2018 had a huge impact, requiring insurers to pay claims equivalent to more than 20 years of profits, the state’s insurance problems predate the fires. California’s failure to update the old rules governing insurance rates have long prevented insurers from preparing for a hotter, drier future.

California’s laws are a national outlier. The rules for projecting wildfire losses, a crucial aspect of calculating insurance rates, are a case in point. California is the only state in the country that requires property insurers to project future wildfire losses based on average wildfire losses over the last 20 years, regardless of where they plan to do business. Every other state allows insurers to base their rates on where they intend to sell insurance, taking into account the degree of fire risk to the properties they plan to insure.

California is also a national outlier on rate approval in that it’s a “prior approval” state. That means an insurer must receive approval from the California Department of Insurance before it may increase or decrease rates.

While California law promises a 60-day approval period, it often takes six months or more to get permission to change rates. At times of high inflation, slow approvals require insurers to leave the highest-risk areas or face financial ruin.

A less visible but nevertheless critical issue is the financial well-being of the FAIR Plan, a pool of insurers providing last-resort coverage. The FAIR plan is growing well beyond its ability to pay claims for large fires. And if it runs out of money, it will charge insurers, as members of the pool, a fee in addition to claims from their own customers for the same fire. If that fee gets large enough, it could devastate insurers. We must address this.

Fortunately, Insurance Commissioner Ricardo Lara has recognized the need to fix these problems. His Sustainable Insurance Strategy would update California’s rate regulations and approval process while requiring insurers to make commitments to cover high-risk areas. The proposal is far from perfect, but we look forward to working with all the interested parties to increase insurance availability and restore the health of the market.

While state regulations and processes can be changed, we remain vulnerable to forces that are beyond our control. Inflation makes repairing and rebuilding homes much more expensive, driving up rates. Longer dry seasons increase the chances of devastating fires, having the same effect in the short term. We need a system that acknowledges these realities.

But raising rates is not a long-term solution. Reducing them over time will require consensus on how to handle combustible fuels near valuable property.

That will take a lot of time and effort. California homeowners’ insurers are ready to do our part to secure an insurable future for the state.

Rex Frazier is the president of the Personal Insurance Federation of California.

Newsom needs to look out for homeowners, not insurance companies

By Jamie Court

Home insurance companies have put Californians in a bind by refusing to sell new policies or renew many customers, leaving them with few coverage options. That has driven more homeowners into the high-cost, low-benefit FAIR Plan, a pool of insurers required to provide last-resort coverage.

Gov. Gavin Newsom recently announced legislation to allow insurance companies to hike rates more quickly in an effort to woo them back to the state. While that will certainly leave Californians paying higher rates, it’s not likely to get more people covered.

Insurance companies are refusing to write new policies despite substantial recent rate hikes — an average of 20% for State Farm and 37% for Farmers, for example. What has them spooked is greater exposure through the FAIR Plan, which increasingly covers expensive homes in wildfire-prone areas. Insurers are on the hook for FAIR Plan claims, and their exposure increases with market participation, so they limit their participation.

Only freeing people from the FAIR Plan will solve this. The most practical way to do that is to require insurers to cover people who harden their homes against fire. We have mandatory health and auto insurance, so why shouldn’t we have it for homes that meet standards?

Hardening is expensive enough that most homeowners are unlikely to do it without guaranteed coverage. Mandating insurance is therefore the best way to mitigate wildfire risks.

Mitigation efforts are already working, with major claim events dwindling in recent years. Moreover, insurers recovered billions from the utilities responsible for major fire losses in 2017 and 2018.

The current crisis was precipitated not so much by wildfires as by investment losses and rising construction costs. Insurers responded by tightening underwriting and raising rates.

Insurance companies got their hikes, but they refuse to write new business here until they get more. Unfortunately, Newsom and Insurance Commissioner Ricardo Lara are ready to give them what they want.

Last week, Lara proposed regulations attempting to address the crisis. Echoing a legislative proposal that failed last year, they would allow companies to raise rates based on black-box climate models. Florida tried a similar approach, and its rates are now about double California’s. Florida’s insurer of last resort covers 20% of its homeowners, roughly five times the share in California.

The proposed regulations purport to require insurers to increase sales to homeowners in “distressed areas” by 5%. However, they would not require them to charge prices consumers can afford. The requirement to cover these areas could also be waived if an insurer shows it’s “taking reasonable steps to fulfill its insurer commitment.” And the plan gives companies two years to comply but lets them start charging all policyholders higher rates immediately.

Newsom cheered the proposal, essentially arguing that California’s insurance rates are too damn low. He didn’t mention that California insurers’ profits have generally outpaced the national average over the last 20 years.

Newsom’s latest legislative proposal would limit public participation in rate-setting by cutting out so-called intervenors such as Consumer Watchdog, which can challenge unnecessary increases and has saved consumers more than $6 billion over 22 years.

Throwing more money at insurers won’t end the crisis; requiring them to cover responsible homeowners will.

Jamie Court is the president of the nonprofit Consumer Watchdog.

Snap Inc. and California’s Civil Rights Department have reached a $15-million settlement to resolve allegations of sexual harassment, discrimination and retaliation at the Santa Monica-based company.

The settlement brings to a close a more-than-three-year investigation into allegations of employment discrimination, equal pay violations, and sexual harassment. Nearly all the money from the agreement will go toward current and former female employees who worked at the company in 2014 and later.

Snap denies the allegations but said it agreed to settle to avoid a prolonged legal fight.

“We care deeply about our commitment to maintain a fair and inclusive environment at Snap, and do not believe we have any ongoing systemic pay equity, discrimination, harassment, or retaliation issues against women,” Snap spokesperson Russ Caditz-Peck said in an emailed statement.

Snap, which created the popular social media and messaging app Snapchat, grew quickly after its founding in 2011, with its workforce ballooning from 250 in 2015 to over 5,000 in 2022. During that period, women were discouraged from applying for promotions and were subject to unwelcome sexual advances and other harassment, the Civil Rights Department alleged in legal filings.

“This settlement with Snapchat demonstrates a shared commitment to a California where all workers have a fair chance,” Kevin Kish, director of California’s Civil Rights Department, said in a Wednesday news release. “Women are entitled to equality in every job, in every workplace, and in every industry.”

The case against Snap compiled by the Civil Rights Department portrayed a toxic office culture dominated by men. When women filed complaints internally about harassment, they allegedly were denied promotions, given negative performance reviews or were fired. Male managers, meanwhile, routinely promoted male employees over more qualified women, according to the civil rights complaint.

Women at the company were generally paid less than their male counterparts, the complaint alleged. In particular, women in engineering roles, which account for about 70% of Snap’s workforce, faced barriers and struggled to advance beyond entry-level positions.

“Women were told, both implicitly and explicitly, that they were second-class citizens at Snap,” the complaint reads.

Caditz-Peck, the Snap spokesperson, said the company “disagreed with the California Civil Rights Department’s claims and analyses,” but “took into consideration the cost and impact of lengthy litigation … and decided it is in the best interest of the company to resolve these claims and focus on the future.”

“For several years now we have successfully implemented tools and governance to achieve pay equity, and we will keep investing in and implementing policies to ensure team members continue to be valued and paid equitably for their work,” he said.

As part of the settlement, Snapchat agreed to hire an independent consultant to examine and make recommendations on the company’s pay and promotion policies, as well as workplace training.

The company will also be required to hire an outside monitor to audit Snapchat’s handling of sexual harassment and discrimination complaints and share its findings with the Civil Rights Department.

The company also agreed to give information to all employees about their right to report harassment or discrimination without fear of retaliation and ensure they complete training on preventing these workplace issues.

Six Republican governors in the Deep South want their constituents to know that they’re looking out for them.

That’s why they issued a joint statement earlier this year condemning the organizing campaign launched by the United Auto Workers at auto plants across the region.

“As governors, we have a responsibility to our constituents to speak up when we see special interests looking to come into our state and threaten our jobs and the values we live by,” the governors said.

Three of the governors have gone further — signing laws denying state economic development subsidies to any employer that voluntarily recognizes a union (that is, without insisting on a formal vote by workers). They’re Kay Ivey of Alabama, Brian Kemp of Georgia and Bill Lee of Tennessee.

These steps raise the question of whether those governors and other political leaders are breaching federal labor law by their actions, which could prompt the government to invalidate unsuccessful union votes and order new elections.

“We have one federal labor policy, not 50 different state policies, when it comes to union organizing and collective bargaining,” says Benjamin Sachs, a professor of labor and industry at Harvard Law School and the author of a recent article examining how the actions of anti-union politicians may have illegally interfered with employees’ right to “a free and untrammeled choice for or against” a union.

Sachs acknowledges that the rules governing federal preemption of state labor laws are murky about the conditions in which federal labor law would prevail, and also the point at which politicians’ actions render union representation elections unfree and unfair — threshold findings that would prompt the National Labor Relations Board to invalidate an election and order a new vote.

That said, “Alabama probably can’t condition its economic incentives on the relinquishment of the federal right” to voluntary recognition of a union, Sachs told me. But he adds that how any such case unfolds would depend on the federal court that heard it.

Political interference in union organizing campaigns in the South isn’t new. In 2014, Sen. Bob Corker of Tennessee and the state’s then-governor, Bill Haslam — both Republicans — threatened Volkswagen with retribution for taking a tolerant view of a UAW organizing campaign at its factory in Chattanooga.

One visiting VW executive referred positively to the labor-management “works councils” common in the company’s home, Germany: “Volkswagen considers its corporate culture of works councils a competitive advantage,” he said.

Corker, a former Chattanooga mayor, voiced an almost certainly specious claim that VW executives had “assured” him that the company would open a new SUV manufacturing line at the plant — if the workers turned the UAW down. A local VW executive denied that.

After losing the election, the UAW filed an unfair labor practices complaint with the NLRB, but ultimately withdrew it. The union lost another election at the plant in 2019, but two months ago it won a third election there, its first victory at an auto plant in the Deep South.

As the UAW stepped up its campaign to unionize other plants in the South, the region’s Republican political leaders pushed back hard. In their joint statement, the governors of Alabama, South Carolina, Georgia, Mississippi, Texas and Tennessee accused the union of unspecified “misinformation and scare tactics.”

Parroting an argument straight out of the corporate anti-union playbook, they said, “The experience in our states is when employees have a direct relationship with their employers, that makes for a more positive working environment. They can advocate for themselves and what is important to them without outside influence.” All six states have automobile plants that could be targeted by the UAW.

One question relevant to whether the governors have crossed over to engaging in unfair labor practices that could invalidate a union election, Sachs says, is whether the NLRB could judge them to be “agents” of the employers. In that case, the board might consider their actions to be tantamount to actions by an employer interfering with the workers’ right to vote in a free and fair election.

“It doesn’t seem too crazy that the board might find the elected officials to be agents of the employers,” Sachs says. In several cases in which an employer didn’t disavow statements by elected officials warning a plant would close or there would be a loss of jobs if its workers voted to unionize, the board found the election to be unfair. In similar cases, the board does not have to find that there was direct contact between the politicians and the employer.

The chief target of the anti-union laws signed by Ivey, Kemp and Lee is the “card check” procedure, one of the two paths to union recognition under federal labor law — the other being a secret ballot. In the card check process, after more than 50% of employees at a workplace sign authorization cards seeking representation by a union, the employers can voluntarily recognize the union, waive any demand for a secret ballot among the workers, and participate in negotiations.

The Alabama, Georgia and Tennessee laws deny state economic incentives to companies that accept card check authorizations without demanding a secret ballot. They also forbid employers to voluntarily provide unions with contact information for employees without the workers’ prior consent. These both are requirements that obviously make unionization drives harder.

Like other Republican state initiatives, the anti-unionization laws were incubated on the far right — specifically the Koch-backed American Legislative Exchange Council, or ALEC — the source of model laws aimed at cutting taxes, hamstringing healthcare reforms, privatizing public education, blocking environmental regulations and other such conservative hobby horses.

The anti-union laws in the three states are reproduced almost verbatim from a model law ALEC dubbed the “Taxpayer Dollars Protect Workers Act.” To put it another way, neither the state legislators nor the governors had to break a sweat to draft and enact these measures — they were spoon-fed the texts.

Southern states are generally quite candid about their efforts to attract manufacturers by guaranteeing them a low-wage rank-and-file workforce and union-free factory floors. On its economic development web page, for example, Oklahoma even brags about how much lower than national averages are the median hourly wages in 12 occupational categories — $17.01 for machinists vs. $19 nationally, $26.17 vs. $30.75 for construction managers, and so on.

Oklahoma doesn’t have any auto plants, but hope springs eternal. Oklahoma and the six states whose governors signed the anti-union letter are all “right-to-work” states, which ban contracts requiring all workers in a unionized workplace to be union members.

In signing Alabama’s measure denying economic incentives to employers that voluntarily negotiate with unions, Ivey declared, “Alabama is not Michigan. … We want to ensure that Alabama values, not Detroit values, continue to define the future of this great state.”

She said a mouthful. The median annual wage in Alabama was $41,350 last year. In Michigan, where unions are popular, it was $46,940. That’s higher than in any of the other states whose governors signed the anti-union letter. (The median wage in Mississippi, whose governor, Tate Reeves, signed the joint statement, was $37,500, the lowest in the nation.)

Whether states can use their economic incentives to ban card check recognition may have to be weighed by the courts. As John Fry of Harvard Law observed in a report earlier this year, states clearly can’t outlaw card check agreements directly — such agreements are legal under federal law, which protects voluntary recognition of a union and the voluntary sharing of employee contact information.

As for wielding economic incentives as a weapon, the Supreme Court has ruled that states can impose labor-related rules mostly when they’re applied to projects in which the states have a direct interest, such as on public works projects.

But the issue is almost certain to come before the courts again; following its negotiating successes with the Big Three automakers last year, the UAW announced a two-year, $40-million campaign to organize nonunion plants “across the country, and particularly in the South.”

The union lost a unionization election last month at Mercedes plants in Alabama, but has now turned its attention to a Hyundai plant in the same state. Politicians across the South are sure to react with ever more draconian laws and policies aimed at forestalling unionization. Will they be smart enough to keep on the right side of the legal line? Possibly, but that’s not the way to bet.