Brown Would Make Insurers Cover Cities

Assembly Speaker Willie Brown on Tuesday vowed to push legislation forcing insurers to cover cities and other “bad risks” despite warnings that such pressure would prompt the insurance industry to permanently pull out of California.

Responding to a growing crisis in the availability of liability insurance, the San Francisco Democrat said the refusal of big insurers to provide coverage is “a cold money decision” based on the difficulty of predicting the outcome of injury lawsuits.

“I don’t think we have any options,” Brown said of his legislative proposal. “They’ve already pulled out of California for the things we need. . . . But if there is some profit to be made, I’ve got to assume there is (an insurance company) out there interested in making that profit.”

State Senate President Pro Tem David A. Roberti (D-Los Angeles), when asked about Brown’s proposal, said he favors an alternate approach that would reward those who minimize the chances of a suit. But he said he expects the Senate to look favorably on the Speaker’s plan.

More than 40 California cities already are without liability coverage, either because insurance companies refused to renew their policies or because premiums soared beyond their ability to pay. Policy cancellations and high premiums also plague a large number of private businesses including day care centers and recreational facilities such as skating rinks and amusement parks.

The Legislature’s failure to deal with the issue resulted in a successful initiative drive that will allow voters in June to decide whether to restrict damages that individuals can recover in liability cases. The insurance industry has long argued in favor of placing limits on settlements as a means of controlling insurance payments that they say drive the cost of premiums sky high.

Brown, who called the initiative a “phony issue,” has joined with California trial lawyers in fighting the proposal, contending that soaring insurance premiums represent the industry’s attempt to recover investment losses rather than to make up for unjustifiably large court judgments.

Hoping to head off any kind of restrictive legislation, an insurance trade group last week flew Brown and several other lawmakers to England to learn the industry perspective from Lloyd’s of London, the huge reinsurance syndicate that stands behind most American insurance companies.

Brown said his mind was not changed by the trip, adding that he “got into some shouting matches” during discussions with Lloyds’ executives.

More than 30 bills already have been introduced this year proposing a variety of changes in liability law as well as tough restrictions on the insurance industry.

Brown said his proposals would require insurance companies to cover high-risk businesses and public agencies as a condition of doing business in California, much as they are now required to insure bad drivers under an assigned risk program.

“They tell me they will pull out of the business if we do that legislatively,” Brown said. “But I don’t really believe that. It is clear that California is still the most lucrative and attractive state for premium dollars.”

Asked whether he might support a limit on injury suits as a less-risky way to cut premiums, Brown said: “I don’t think you can do that in the best interests of citizens.”

“If someone deliberately gets drunk, drives an automobile, literally destroys the entire motor nerve system that you have,” he said, “I would hate to think that I placed a value of maybe $50,000 on that.”

Roberti said he favors a system that would compensate injury victims only in cases where they are judged to be less than 40% at fault. But in other ways, Roberti said, his approach may be similar to Brown’s.

Although he has not taken a stand on the June 3 ballot initiative, Roberti said he expects it to fail because opponents will have an easier time illustrating their case with television commercials depicting the plight of injured victims.

“The chance of getting any relief in the Legislature if they suffer a defeat at the polls is going to significantly increase,” Roberti said of the initiative’s backers.