AB 125, the final enrolled version can be found here, was enrolled and presented to the Governor, and signed into law.  According to the Assembly Analysis, SB 125 does the following:  

ANALYSIS  :    Existing law (1) defines guaranteed automobile protections insurance” to be insurance that covers a  vehicle purchaser or lessee for the difference between the actual cash value of the insured’s vehicle at the time of a  total loss or unrecovered theft and the amount owed on the vehicle, (2) includes within this definition an allowance for up to $5,000 above the amount necessary to cover the gap for purchase of another vehicle, and (3) provides for “waiver” clauses in vehicle conditional sales contracts or lease agreements allowing the seller, lender, or lessor to waive the difference between the actual cash value of a vehicle at the time of a total loss or unrecovered theft and the amount owed on the vehicle. 

This bill:   1. Changes the definition of “GAP” so that the deductible  amount provided by a standard property damage insurance  policy may also be covered by GAP insurance. 2. Provides that a “waiver” clause in a vehicle conditional sales contract or lease agreement, which is similar to GAP insurance, but does not constitute insurance, and which can be sold by people who are not licensed  insurance agents, may include the deductible amount provided by a standard property damage insurance policy. 3. Replaces the word “automobile” with the word “asset” in the definition of these contracts so that other vehicles, such as motorcycles, motorhomes, boats, and off-road vehicles, are also eligible to be covered by  GAP protection. 4. Authorizes waiver clauses to also include a discount or incentive, above the amount required to satisfy the obligation on the loan, lease or sales contract, for the vehicle owner to purchase a replacement vehicle using the same seller, lender or lessor.


Comments: According to the Senate Insurance Committee analysis, this bill was introduced by the Assembly Insurance Committee to fix an error in last year’s AB 2782 (Assembly Insurance Committee), Chapter 400, Statutes of 2010, omnibus bill and ensure that California law does not unreasonably frustrate the legitimate expectations of California consumers with respect to what “Gap” insurance extends to. 


Background and Discussion:  During the prior session, the Assembly Insurance Committee undertook to recognize in statute, and acknowledge the differences which exist between true insurance products, and waiver provisions in loans, leases and sales contracts which have long been  marketed as “GAP”.  In doing so, the committee’s  AB 2782 inadvertently eliminated coverage for the  deductible amounts commonly provided for in automobile  insurance policies.  This oversight renders most subject contracts in the California market non-compliant.  It also puts at risk consumers’ reasonable expectations about the scope of the protection they are purchasing since these expectations cannot be met under the definitions enacted by AB 2782.