Walter Pierce

Realpolitik 101

by Walter Pierce

Wednesday, June 22, 2011
Written by Walter Pierce

Rep. Page Cortez's House Bill 400 celebrates a basic economic principle - competition - which is exactly why an obscure trade group unleashed a lobbying barrage to kill it.

Wednesday, June 22, 2011
Written by Walter Pierce

Rep. Page Cortez's House Bill 400 celebrates a basic economic principle - competition - which is exactly why an obscure trade group unleashed a lobbying barrage to kill it.

[6/22 update: Not entirely unexpected, House Bill 400 was killed via Senate procedure Tuesday afternoon.]

You want a primer on how state government works - not how it works ideally, but how it really works? Check out House Bill 400 by Rep. Page Cortez, a Lafayette Republican. The actual bill is but three pages long. That's blissfully short by legislative standards. But, as I learned, it deals with an incredibly and overly complex topic: contingency liability insurance for companies in the rent-to-own car business.

I'll get to how Cortez's bill is a window into the workings at the Capitol in a bit, but first, some background: There are two types of contingency liability-insurance carriers doing business in Louisiana. "Admitted" companies are vetted by the state Department of Insurance and pay into the state's insurance guaranty fund - a pot of money designed to cover customers of an insurance carrier if it goes belly up and can't meet its obligations. Admitted carriers do most of the heavy lifting when it comes to insurance in the state, covering the garden-variety stuff like cars and homes.

"Surplus" or "non-admitted" carriers, on the other hand, offer more complex policies and are typically out-of-state and even out-of-country companies, although it should be noted that 70 percent of homeowner policies in the New Orleans area are now with surplus carriers because the admitted carriers won't take on the hurricane risk and the state-run Citizens Insurance is too expensive. While they're not required to pay into the insurance guaranty fund, surplus carriers do pay a state sales tax, to which the admitted carriers are not subject. The surplus carriers, however, are beholden to the same state rules and restrictions as the admitted carriers.

As best I can tell, the rent-to-own car business is the only industry in Louisiana required to carry contingency liability insurance purchased from an admitted carrier; surplus carriers are off limits. But here's the rub: There are only two organizations in the state, think of them as cartels, through which a lease-to-own car company can acquire such a policy. One of them is New Orleans-based South East Auto Dealer Rental Association, hereafter known as SEADRA.

Cortez's HB 400 opens up the insurance market for rent-to-own car lots to the surplus carriers - a pretty simple proposition we can file under the rubric, "The market is served by competition." The freshman representative sponsored the legislation at the request of a constituent in Lafayette who owns such an enterprise and who wants more choice in his insurance coverage.

HB 400 sailed through the House in early May on an 83-5 wave, despite an amendment tacked on by New Orleans Democratic Rep. Jeff Arnold as a favor, a source tells me, for a friend - uberlobbyist Randy Haynie, one of only two lobbyists at the time who were in the employ of SEADRA.

The amendment, which the House approved by a thin margin, would have required these surplus insurance carriers to also pay into the insurance guaranty fund, which, coupled with the sales tax they already pay, amounted to a poison pill designed to kill the bill.

It didn't, and in fact Arnold's amendment was stripped in a Senate committee.

That's when SEADRA, in an effort to protect its monopoly, opened up its playbook.

On Friday, June 10, the association hired three more lobbyists to complement the two already on the payroll. The next day, it hired another lobbyist. Then another on Sunday, one more on Monday and, for good measure, another on Tuesday, adding seven lobbyists over four days for a total of nine, each with one mission: kill HB 400. This phalanx of persuaders was commissioned to lobby not only state lawmakers, but Gov. Jindal, too.

The timing wasn't coincidental: 400 had cleared a Senate committee by this time, stripped of that poison pill, and was ready to move to the full Senate, which it did on Monday of this week.

By press time Monday for this week's issue the upper chamber had yet to consider Cortez's bill, which few workaday Louisiana residents have any vested interest in. The bill's survival will tell us how much stroke lobbyists enjoy at the Legislature. If it gets to Jindal's desk only to be vetoed, it's a fair wager that SEADRA will have joined the ranks of the governor's recent campaign contributors.