Changes in ‘Deep-Pockets’ Liability Law Rejected

A modest attempt to revamp California’s “deep-pockets” liability law, which has been blamed for soaring insurance rates, fizzled Tuesday when an Assembly committee narrowly rejected a reform proposal authored by Assembly Speaker Willie Brown (D-San Francisco).

A spokesman for Brown, however, played down the loss, saying the Speaker intends to introduce a more comprehensive bill later in the legislative session. This future proposal, they said, will address not only the crisis that has caused many cities to go without insurance coverage, but also insurance practices that have penalized people living in areas of high crime and accidents.

“We were already working on stuff that is more substantial than this, so you didn’t see us invest a lot (in the committee hearing); there was no display of power here,” said Richard Ross, Brown’s chief of staff.

Brown’s bill is viewed by critics as an attempt, backed primarily by trial lawyers, to draw support away from a more sweeping reform proposal that will appear as an initiative on the June 3 primary ballot.

The crisis in liability insurance--listed as a top-priority problem both by Brown and Republican Gov. George Deukmejian--was touched off, according to insurance companies, by large court judgments from a rash of personal-injury suits. The insurance industry contends that many of the suits were filed against big businesses and a variety of government agencies simply because they are assumed to have deep pockets of wealth.

At issue is a California liability doctrine that allows the courts to hold one party liable for all damages in an injury case even if that party bears only a small share of the fault.

Fails by Two Votes

Brown’s measure, which fell two votes short of passage in the Assembly Judiciary Committee, would have protected cities, counties and state agencies by limiting judgments against them to no more than their own share of the responsibility for injuries on public streets and highways. It would have had no effect on cases stemming from injuries that take place elsewhere, such as in county hospitals or on city-operated playgrounds, or on claims filed against private businesses.

The bill’s critics, including most public agencies and businesses, argue that the measure is too narrow to offer any real protection.

The Speaker’s bill, in fact, has few supporters other than the trial lawyers, who have opposed most attempts to overhaul the deep-pockets doctrine and whose fees in such cases generally are a share of the final settlement. Brown, in addition to being the Assembly’s most powerful Democrat, is a trial lawyer.

A judiciary subcommittee had recommended approval of the Speaker’s bill, and the full committee’s Democratic majority was expected to provide the votes. However, two Democrats, Richard Robinson of Garden Grove and Jean Duffy of Sacramento, left the hearing room before Tuesday’s vote and failed to return before the hearing was adjourned.

New Reform Package

Brown could ask the Assembly to order another hearing. But Ross said he does not see much point in that since a new reform package is to be introduced.

The Assembly has rejected several attempts to rewrite liability law, including a major reform proposal approved last year in the Senate. Like the deep-pockets initiative on the June ballot, the Senate-approved measure would have allowed courts to award damages for pain and suffering and other causes only to the extent that each party is found to be responsible for an accident.

Peter Hinton, president of the 5,400-member California Trial Lawyers’ Assn., charged on Tuesday that both the Senate-approved measure and the initiative “are a fraud on the people of California” because they would not force insurance companies to lower their premiums.

Collection of Judgments

Hinton said there are only a handful of cases in which an injury victim has collected a judgment from a party that was barely at fault. Supporters of the reform measures, he added, “are asking that we weigh between a guilty party and an innocent party and that we punish the innocent.”

Ross said Brown’s new package of insurance legislation would include a measure forcing insurance companies to lower their rates in accordance with any drop in settlements. He also said Brown will introduce a proposal to keep insurance companies from “redlining” poor areas by charging higher premiums for auto and home insurance.