BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2430
                                                                  Page  1

          Date of Hearing:   April 19, 2004

                        ASSEMBLY COMMITTEE ON TRANSPORTATION
                                Jenny Oropeza, Chair
                   AB 2430 (Wiggins) - As Amended:  April 12, 2004
           
          SUBJECT  :  Commercial air carriers: hot air balloons.

           SUMMARY  :  Removes hot air balloon owners from the jurisdiction  
          of the Public Utilities Commission (PUC) and releases them from  
          specific insurance requirements.   Specifically, this bill  :  

          1)Exempts hot air balloons from PUC regulations that require  
            accident liability insurance by excluding any person owning,  
            controlling, operating, renting, managing, furnishing, or  
            otherwise providing transportation by hot air balloon for  
            entertainment or recreational purposes from the definitions of  
            "commercial air operator," and "aircraft."  

          2)Requires hot air balloon owners and operators to provide their  
            passengers with a copy of a release from liability form.  

           EXISTING LAW  :  

          1)Provides, pursuant to federal law, that balloonists are  
            regulated by the standards set by the Federal Aviation  
            Administration.  

          2)Authorizes PUC to regulate public utilities including highway  
            carriers, household goods carriers and charter-party  
            (passenger) carriers in order to ensure that carriers which  
            operate in California have adequate insurance, provide  
            workers' compensation coverage, and operate safely.  

          3)Defines a "commercial air operator" as any person owning,  
            controlling, operating, renting, or managing aircraft for any  
            commercial purpose for compensation, and "aircraft" as any  
            contrivance used for navigation of, or flight in, the air.  

          4)Requires, pursuant to PUC General Order 120-C (GO 120-C), that  
            an "aircraft" maintain $100,000 per passenger in passenger  
            liability, $100,000 in non-passenger liability for a minimum  
            of three non-passengers, and $100, 000 minimum in third-party  
            property damage.  









                                                                  AB 2430
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           FISCAL EFFECT  :  Unknown

           COMMENTS  :  Currently, there exist 40 companies in California  
          that offer balloon rides for compensation.  Most of these  
          companies are located in Napa Valley, Sonoma Valley, Palm  
          Springs, Temecula, and San Diego (Del Mar and Escondido).  

          The author provides that a convergence of issues, some of, which  
          are common to the rest of the country, and some, which are  
          unique to California, has brought about this measure.  During  
          the past decade, commercial balloon operators have had a choice  
          of several insurance companies to meet their needs.  The  
          companies were admitted to:  a) write insurance in the State of  
          California;  b) provide the required proof to the PUC; and, c)  
          provide that insurance at acceptable rates.  

          Since September 11, not only has aviation insurance taken a big  
          hit, but also all insurance, including the reinsurance industry.  
           Additionally, the stock market and falling interest rates have  
          negatively affected investments by this industry.  As a result,  
          insurance companies have raised premiums and tightened  
          underwriting procedures.  Smaller specialty markets such as the  
          ballooning industry were particularly vulnerable to these  
          events.  In 2002, the author points out that two insurance  
          companies stopped writing policies for balloonists.  

          Simultaneously, at a time when specialty insurance had been the  
          most difficult to obtain, the PUC started to strictly enforce  
          its GO 120-C, a regulation that stipulates liability insurance  
          coverage limitations to be carried by "aircraft," as defined  
          (See Existing Law).  The PUC had begun strict enforcement  
          actions against balloon operators who have insurance at the  
          required limits but who obtain their insurance from a  
          non-admitted carrier.  As a result of the above, there are only  
          two insurance companies writing hot air balloon insurance in  
          California and one of the two is not recognized by the PUC.  

          The author states that the root of the problem is PUC GO 120-C.   
          The hot air balloon industry believes the regulations under this  
          law were not meant for them.  Balloonists explain that GO 120-C  
          existed before they arrived in California as an industry in the  
          mid-1980s and accordingly were not intended to be included.  

          The PUC takes no position on whether or not the Commission  
          should or should not regulate insurance limits, but it noted  








                                                                  AB 2430
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          that the obligation to regulate exists and has been carried out  
          for more than 20 years.  The PUC admits that commercial balloon  
          flights could not have been intended when the law was passed in  
          1963 and adds that balloonists are free to ask the Legislature  
          to exclude them from the code sections that subject them to that  
          law.  However, the PUC adds that they are not prepared to  
          endorse that request absent another government agency to take  
          their place to ensure enforcement of the minimum insurance  
          requirements.  

          The Consumer Attorneys of CA (CCA) are officially opposed to  
          this bill on the grounds that the April 12 amendment adding a  
          release of liability waiver form places unacceptable burdens on  
          the California consumer.  Balloonists offer assurances that they  
          are still subject to tort law and it is in an owner's interest  
          to protect his or her business by obtaining liability insurance  
          of their own volition.  In addition, landowners require that  
          balloonists who use their property for launch and landing to  
          provide proof of insurance.  CCA argues that it is difficult to  
          see how balloonists will be motivated to obtain adequate  
          insurance when they mandate that every passenger sign a waiver  
          of liability.  

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           

          Aerostat Services, Inc.
          Airship and Balloon Company
          Balloon Above the Desert, Inc.
          Balloon Excelsior
          Balloon Federation of America
          California Dreamin'
          Calistoga Balloons of Napa Valley
          Delta Relocation Services, Inc.
          Merryvale Vineyards
          Napa Valley Aloft
          Napa Valley Balloons, Inc.
          Professional Balloon Pilots Association of Napa County, Inc.
          Up & Away Ballooning, Inc.
          Individual letters (9)

           Opposition 
           








                                                                  AB 2430
                                                                  Page  4

          Consumer Attorneys of California
           
          Analysis Prepared by  :    Frances Chacon / TRANS. / (916)  
          319-2093