Copyright© 2000 by School Services of California, Inc.

Volume 13                    For Publication Date: August 18, 2000                   No. 18

Legislation Resolution Introduced to Urge FEMA
Not to Proceed With Local Insurance Requirements

Assembly Member Lou Papan (D-Millbrae) has introduced an Assembly Joint Resolution that would urge the United States Congress to direct the Federal Emergency Management Agency (FEMA) not to proceed with its proposed public assistance insurance requirements, or to modify its proposed regulations.

On February 23, 2000 FEMA published an Advanced Notice of Proposed Rulemaking pertaining to public assistance insurance requirements. See June 25, 1999 Update article, "FEMA Proposes New Insurance Requirements for Public Assistance Programs," page 103.

The proposed rule would require public entities to purchase certain levels of insurance for the categories of All-risk, Earthquake, Flood, and Wind. The proposed rule is an all or nothing approach that requires public entities to purchase the minimum requirements or be barred from collecting any federal assistance. FEMA’s new proposed regulation would not give local public entities any flexibility to cover only those perils that they believe warrant coverage based on their probability of occurrence. As a result, it is estimated that within California, insurance costs to public entities could exceed $870 million and would represent an estimated six to ten-fold increase in property insurance cost.

Assembly Member Papan’s Joint-Resolution expresses the opinion that public entities in California would be disproportionately affected because of their unique exposure to the peril of earthquake. He points out that there may be other alternatives that are more cost effective than simply purchasing insurance, such as, self-insurance, pooling, and sharing of limits.

A joint resolution has no effect of law, but is used to communicate the unanimous position of the California Legislature on key issues impacting the State must be concurred in by both the Assembly and Senate and then it is transmitted to the Congress for its consideration. In addition, each Senator and Representative from California in the United States Congress will receive a copy of AJR 67.