Legislation aimed at amending a California law that barred a key GAP feature is moving quickly through the state Legislature, raising the prospects of the issue being resolved by June.

The bill (AB 125), spearheaded by OwnerGUARD Corp., was passed by the state Assembly by a 69-0 vote. The San Diego-based F&I product provider, working closely with the California New Car Dealers Association (CNCDA), is hoping the bill will follow a similar path through the state Senate and be on Governor Jerry Brown’s desk by June, reported F&I and Showroom.

“Frankly, everything’s happened quicker than we thought,” said Michelle Dicks, the company’s general counsel. “Hopefully, it’ll get to the [Senate Banking Committee] by the middle of March. If that happens, we could see a vote on the Senate floor a week later, which means we could be done by the end of March, beginning of April.”

Based on a law that took effect on Jan. 1, California dealers are prohibited from selling deductible coverage through GAP if they have not obtained an agent’s license. The California Department of Insurance has agreed to delay enforcement of the requirement in the law to have updated agreements through March 31.

The issue stems from an Omnibus bill (AB 2782) Gov. Arnold Schwarzenegger signed last September. It packaged, among other things, a new licensing requirement for sellers of accident and health insurance. How GAP got thrown into the new requirement is a case of unintended consequences.

Less than a month before the law took effect, the CNCDA asked the state’s insurance department to clarify whether a GAP waiver would fall under the new requirement. In its review of the law, the state agency determined that GAP waivers could no longer cover a customer’s deductible.

The CNCDA and OwnerGUARD moved quickly to get the state agency to reconsider its stance. And after extensive talks, the agency agreed to work with the association and the company on fixer legislation. The two organizations also received help from various industry associations, including the Guaranteed Asset Protection Alliance, the American Financial Services Association and the Consumer Credit Industry Association.

“Initially, the department of insurance said, ‘Fine, we know it’s a problem, so we’ll give you a moratorium on enforcement of the law,” said Dicks. “We still can’t cover the deductible and we have until March 31 to get new forms printed, but we’re getting closer to a resolution.”

The end of March also became the unofficial deadline for the fixer legislation to get through the California State Legislature. If the association and OwnerGUARD are unsuccessful at capturing the attention of lawmakers – which are embroiled in a bitter fight over the state budget – Dicks said it might be until September before any action can be taken.

That’s one of the reasons why OwnerGUARD turned to John Norwood, a noted California lobbyist who specializes in the state’s insurance and financial sector.

Working closely with the CNCDA and California Financial Services Association, Norwood was instrumental in getting the Assembly Insurance Committee to place an urgency clause in the bill when it passed the legislation by a unanimous vote. With the urgency tag, the bill can become law once it receives Gov. Brown’s signature. Without it, the bill wouldn't take effect until Jan. 1, 2012.

“A lot of it has been John’s ability to get these people to listen. He’s done a phenomenal job,” said Dicks. “We did spend a lot of time with him initially so he could understand what we were proposing, but I think assembly members were willing to help once they understood what we were trying to do.”