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 Page 2 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 Page 3 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