Public in for Blitz on ‘Deep Pockets’

It may take $12 million or more, but both backers and opponents of a controversial ballot measure are already hard at work trying to transform “deep pockets,” an obscure, centuries-old legal doctrine, into a household phrase by primary election day, June 3.

If early campaigning is any indication, the transformation will be a stormy one. One opponent predicted last week that a “vicious” media battle for votes is on the horizon. The principal combatants are shaping up as lawyers on one side and the insurance industry and big business on the other.

Standing on the sidelines, cheering on the forces opposing the lawyers, will be, among others, hundreds of California city and county government officials who hope that the measure will save them millions of dollars each year.

‘Affects Every Single One’

“Every city in Orange County will be behind it because it affects every single one of them, from the very largest to very smallest,” Laguna Beach City Manager Kenneth C. Frank said Sunday. “It’s the biggest thing we have going this year.”

Frank said that while cities are prohibited from donating public funds to the campaign, they can participate with resolutions supporting the initiative’s passage, as well as enlisting other forms of public backing such as newspaper editorials.

At issue is the legal concept known as joint-and-several liability. The doctrine seeks to assure a plaintiff the full extent of his rightful damages in personal injury or wrongful death lawsuits. It allows winning plaintiffs--unfairly, initiative proponents say--to reach into the “deep pockets” of the wealthiest or most heavily insured of several defendants even if the richer defendant is judged only minimally at fault. Often in such cases, co-defendants found to be chiefly at fault but with little or no resources wind up paying nothing.

$2-Million Judgment

As an example, Laguna Beach lost a case last summer involving a drunk-driving accident and was ordered to pay the entire $2-million judgment awarded by a jury, even though it was found to be only 35% negligent. And that was because the driver involved in the accident did not have insurance.

The initiative’s passage would leave intact the liability doctrine’s application to actual damages, such as medical costs and lost earnings. At the same time, however, passage would strip away its application to non-economic damages, such as pain and suffering--often awarded in the millions of dollars. Those costs would be borne based solely on a defendant’s degree of culpability, not his ability to pay.

The ballot measure, dubbed the Fair Responsibility Act by proponents, qualified for the ballot last month after backers obtained nearly 500,000 valid petition signatures. Its language is virtually identical to legislation that has been stuck for months in the Assembly Judiciary Committee in the state Legislature.

Backing the measure is a coalition of hundreds of California cities, all 58 counties, private health organizations, corporations and professional and business groups. These interests contend that they are hit hardest by application of the “deep pockets” doctrine.

Beyond large awards, the most direct effect involves skyrocketing insurance costs for government entities.

Premiums, for instance, for the Orange County Cities Risk Management Authority, a pool of 10 cities, will total about $3.2 million this year, nearly three times what the group paid for a more extensive policy in 1985.

Last year’s policy provided $26 million coverage per claim, while the new coverage is only $5 million. Additionally, deductibles have climbed from $100,000 or $250,000 to $250,000 or $400,000.

2 Cities Withdrew

Authority members include Laguna Beach, Tustin, Irvine, Westminster, Cypress, La Palma, Los Alamitos, San Clemente, Stanton and Yorba Linda.

Two other cities, Villa Park and Orange, withdrew from the authority. Villa Park managed to find other insurance, while Orange decided to “go bare”--to carry no insurance and rely on its own reserves.

Also supporting the measure are insurance industry officials who say that disproportionately large awards collected from well-heeled defendants drive up the premiums charged to governments and other large institutions. Increasingly, insurance officials say, they have been forced to cancel coverage altogether for these vulnerable clients.

The initiative’s primary opposition comes from the 5,400-member California Trial Lawyers Assn. Representatives of that group say that the measure would deprive innocent victims of just compensation for their injuries. They further argue that the insurance industry cannot be counted on to substantially lower premiums if voters approve the measure.

Pat Russell’s Criticism

Last week, the two sides exchanged their first verbal barbs in a likely preview of the media campaign that each side says will cost it about $6 million.

First, Los Angeles City Council President Pat Russell, a co-chair of the initiative campaign and president of the League of California Cities, fired a broadside at trial lawyers. She charged that they have used the “deep pockets” doctrine to win higher fees for themselves.

“ ‘Deep pocket’ cases cost the City of Los Angeles $16 million in 1984,” Russell told a Los Angeles news conference. “That money could--and should--have been used for important public services.

“A lot of it went to greedy trial lawyers who have an intense economic self-interest in keeping the law as it is. It’s time we kicked them off the gravy train.”

Called a Rip-Off

Los Angeles attorney Browne Greene, president-elect of the trial lawyers group, countered that “cities and counties are being orchestrated by the insurance companies. . . . (This) is a massive insurance industry rip-off. It’s an attempt by insurance companies to line their own pockets.”

Generating voter interest in support of the measure will be the task of the Burlingame, Calif.-based Woodward & McDowell political consulting firm, veterans of successful campaigns promoting the California Lottery initiative in 1984 and the 1976 election of former Sen. S. I. Hayakawa (R-Calif.).

Jack McDowell, a partner in the firm, said the amount of money spent on the campaign will depend largely on the opposition. But, he added, the legal concept is likely to confuse many voters, and initiative backers consequently will need to pump a lot of time and money into educating the public.

“We’re going to stress the need for fairness and the fairness of this act,” McDowell said.

The name of the campaign committee, “Taxpayers for Fair Responsibility,” offers a hint at which group the supporters of the measure will claim are the principal “deep pockets” victims. Although big business has had its problems with joint-and-several liability, it is local government--cities, counties, school districts and special districts--that most directly touch the daily lives of the voters. The bleeding of local services by huge damage awards and subsequent insurance premium hikes hurt the taxpayers and consumers, campaign officials assert.

Lawyers Seen as Villains

As evidenced by council President Russell’s comments, the trial lawyers will become a large, identifiable target that supporters will portray as the chief villains in the “deep pockets” debate.

For their part, the trial lawyers say they are not bothered much by that prospect, contending that their perceived unpopularity will be canceled out by the other side.

“As much as people hate lawyers,” observed trial lawyer spokesman Steve Masterson, “they also hate insurance companies.”

But apparently recognizing its vulnerability to attack, officials of the group say they hope to form an alliance with victim advocate groups, labor unions and consumer organizations. Such organizations could help shield the lawyers from charges of self-interest, Masterson said.

To fight the initiative, the trial lawyers have hired the Washington political consulting firm Murphine Corp., which helped defeat a similar ballot measure in Florida in 1984. The principal campaign consultant is John A. Walsh Jr. of Boston, former President Jimmy Carter’s 1980 national political strategist and also a veteran of campaigns for former Boston Mayor Kevin White and Massachusetts Gov. Michael S. Dukakis. Polling will be conducted by Patrick Caddell, who has sampled voter opinion for a host of Democratic presidential candidates.

Masterson said the primary message the trial lawyers’ campaign will try to convey is that the “deep pockets” doctrine has worked for centuries, in both American and English common law, and is an important legal device to protect innocent victims. But Masterson predicted that voters may have difficulty relating the issue to their daily lives.

“Nobody goes to bed saying: ‘I hope they don’t tamper with joint-and-several liability tomorrow,’ ” Masterson said.