AB 125 was designed to “rectify a drafting error in AB 2782 (Insurance Committee), Chapter 400, Statutes of 2010, an omnibus bill sponsored by the California Department of Insurance. In the effort to recognize in statute, and formalize the differences between true insurance products, and waiver provisions in loans, leases and sales contracts, what has long been marketed as GAP products, the drafters inadvertently eliminated coverage for the deductible amounts commonly provided for in automobile insurance policies. The effect of that error is that virtually all contracts in the market are non-compliant with the law, and consumers’ reasonable expectations about the scope of the protection they are purchasing cannot be met under the current definitions. GAP insurance and related waiver products provide a sound consumer protection service because it is common with respect to vehicle purchases that loan or lease amounts exceed the “actual cash value” of the vehicle in the early years of a loan or lease. Until these products came into the market, consumers often found themselves owing a lender more than the correct insurance settlement would provide. The result for consumers was either out-of-pocket losses to make up the difference, or damage to the consumer’s credit rating due to defaulting on the remainder of the loan or lease balance.” (See Assemply Analysis, 125 (Insurance Committee), as Amended March 7, 2011). A copy of the Bill can be found here. UPDATE: April 13, AB 125 passed the Senate Committee on Insurance.