Suit on Auto Insurance Pricing Dismissed

A suit by the City of Compton, the Southern Christian Leadership Conference and six taxpayers seeking to upset the territorial rating system for pricing auto insurance was thrown out of court Friday by a judge who said he sympathized with those suing but could find no legal basis for their suit.

Superior Court Judge Marvin D. Rowen said that before any lawsuit is brought, the plaintiffs must exhaust their administrative remedies with the state Department of Insurance. He also questioned whether the City of Compton or any of the other parties bringing the suit had proved an injury that would give them standing to sue.

“The court is sympathetic to those paying the horrendous rates being charged in all cities and counties, but that’s not the issue before us,” said Rowen, a recent appointee of Gov. George Deukmejian who hears cases in the Compton Courthouse.

Assistant Compton City Atty. Troy Smith termed the judge’s advice to pursue administrative remedies “a joke,” because, he said, there is no evidence that the Insurance Department is prepared to act to overturn the territorial rating system.

However, a key Insurance Department official, Everett Brookhart, chief of consumer affairs, said earlier this month that the department was drafting with legislators some alternatives to the present rating system.

Smith said he would appeal Friday’s decision directly to the state Supreme Court, which recently suspended the state’s new mandatory insurance law to hear a suit that also charges that the state is countenancing discriminatory rates. That suit, however, would not necessarily do away with territorial ratings but would simply prohibit the state from forcing people affected by them to buy insurance.

Under territorial ratings, different areas are charged varying automobile insurance rates based on individual company losses or claims paid in those areas. The result of the system is that rates are often two or three times higher in inner-city communities than in outlying areas, and, very frequently, poor people are charged higher rates than rich ones.

In the southeast part of Los Angeles County, a recent comparative price survey released by the Insurance Department showed that rates for similar cars and drivers in Compton ranged up to nearly three times higher than in Paramount, the neighboring city on the east, and up to nearly two times higher in Lynwood, the neighboring city on the north.

Besides the Insurance Department, Farmers Insurance Exchange, the second largest auto insurance seller in California, was a defendant in the suit heard Friday.

The Insurance Department’s pricing survey showed that for one type of male driver, Farmers would charge between $1,383 and $2,047 in Compton, as contrasted with $717 in Paramount and $1,150 in Lynwood. Farmers’ rates were also often shown in the survey to be higher in most communities than most of the other 17 companies listed.

A Farmers spokesman, Jerry Clemans, on Friday again challenged the validity of the department’s survey. He said it does not take into account many discounts that Farmers offers for particular drivers.

For instance, Clemans said, 30- to 60-year-olds get up to a 32% discount off published rates, accident-free drivers a 20% discount and non-smokers a 12% discount and so on.

“The table as published does not really reflect the sizable bulk of our business,” he asserted.

The attorney representing Farmers in court, Irwin Waldman, said of the plaintiffs, “This is an emotional issue, but from a legal point of view, they’re wrong.”

Opinion Rendered

After the judge had rendered his opinion, Waldman added that he believed the suit had been “filed for publicity purposes and not because there’s any evidence of discrimination.”

Waldman said that he had offered to let the plaintiffs’ attorneys study Farmers’ territorial rating maps in his offices, but that they had not accepted the invitation. He said the maps would show that in at least one wealthy city, Beverly Hills, insurance rates offered by the company are higher than in Compton.

Rowen, in several pages of written commentary, struck down all the arguments by the plaintiffs and at one point, even suggested that citizens of Compton might sue the city on grounds of wasting public funds for filing the anti-territorial rating suit.

“The city is a subdivision of the state of California and cannot sue in a representative capacity on behalf of its residents to contest the constitutionality of a state statute,” he said.

Assistant City Atty. Smith responded that the City Council had unanimously supported the suit and that it unquestionably reflected the sentiment of Compton citizens.

About 25 mostly elderly people demonstrated briefly outside the courthouse against high insurance rates and then filed inside the courtroom to hear Rowen’s dismissal of the suit.