SB 222 is too risky for consumers

OPINION – California’s insurance market is at a crossroads. With massive increases in disaster costs and a regulatory environment that does not readily allow carriers to increase rates to match the risk involved in insuring massive portions of our state, it is clear that something needs to change to fix a broken insurance market.

However, a proposal supported by anti-energy NGOs is not the correct answer to this complex issue.

SB 222, by Senator Scott Wiener (D-San Francisco), would allow individuals and insurance companies to file lawsuits against energy companies for damages related to any disasters dating back to 1965. The bill would also require California’s FAIR plan – the state’s insurer of last resort – to file a lawsuit against energy companies after each disaster that impacts FAIR plan insurance holders.

Proponents of this bill argue that these lawsuits are the only rational way to help cover rebuilding costs. But the truth is that this bill will do nothing to help the victims of January’s Los Angeles fires rebuild their homes and lives. In fact, it will make rebuilding much more expensive.

The only thing this bill accomplishes is the creation of complex and expensive litigation and higher prices for consumers on everything from gas and electricity, to food and household consumer goods.

According to an independent financial analysis by the California Center for Jobs and the Economy, SB 222 would increase the cost of living significantly. Gas prices could jump to $7.38 per gallon – a 63% increase – while diesel could go up to $8.23 per gallon – a 69% increase. Electricity rates and natural gas prices would rise, as well, with homeowners paying an additional $1,100 per year and renters paying an extra $1,600 per year just for increased utility prices.

As we saw during COVID gas price spikes, increasing energy prices has a downstream effect on everything from food and transportation to consumer goods and building materials like lumber, concrete, and hardware. Overall, households could lose up to $6,200 per year in disposable income if SB 222 were to become law.

To make matters worse, SB 222 would likely be tied up in state and federal courts for years due to serious questions about the bill’s retroactivity and other unconstitutional provisions. If this bill were to become law, the impacts to the economy would far outweigh whatever benefits the bill’s proponents promise.

With damage claims estimated to total $1.1 trillion over the next five years, and 22 years of retroactive claims totaling anywhere from $2.9 trillion to $10.8 trillion, businesses across California would experience an unprecedented increase in operating costs. These operating cost increases would most likely result in job losses across the economy and a massive hit to our state budget.

Despite the proponents’ claims, SB 222 does nothing to help Los Angeles rebuild, and it simply will not fix California’s broken insurance market. The Legislature must reject this bill. We need to find real pathways to rebuild Los Angeles and help fire victims without massively increasing the cost of living here.

Kyla Christoffersen Powell is the President and CEO of the Civil Justice Association of California.