Panel Rejects Bill to Ease State Crisis on Liability

Hopes of finding a legislative solution to the state’s insurance crisis that would head off a potentially fractious ballot initiative campaign appeared to dissolve Monday when a key Assembly subcommittee recommended rejection of a bill aimed at cutting the cost of liability judgments.

After brief discussion, the heavily lobbied measure, which has been bottled up in the Assembly for more than six months, was able to muster only two votes on the five-member judiciary subcommittee on the administration of justice.

The full Judiciary Committee is expected to accept the recommendation and formally reject the bill, which the state Senate resoundingly approved in September.

Supported by a coalition of private businesses and local governments but opposed by trial lawyers, the measure, by Sen. John F. Foran (D-San Francisco), seeks to scale down the size of personal injury awards by limiting such damages as pain and suffering to each defendant’s individual share of blame.

It is virtually identical to Proposition 51 on the June 3 ballot, the so-called “deep-pockets” initiative that was drafted in response to skyrocketing insurance premiums, a rash of policy cancellations and the Assembly’s repeated rejection of any bill that would limit lawsuit judgments or attorney fees.

After the unfavorable vote, Foran blamed trial lawyers, who he charged have a major influence in the lower house, and predicted that the action will galvanize support for the initiative. The California Trial Lawyers Assn. is a major contributor to Assembly election campaigns and opposes limiting liability awards. The organization has taken the lead in campaigning against Proposition 51.

“The fact that it was killed by the Legislature will perhaps enhance the argument that the Legislature is unwilling to address this serious crisis that is out there,” Foran said. “It affects cities, counties, small businessmen, hospitals and schools; everyone is affected.”

A spokesman for a newly organized coalition of consumer groups and others who oppose the initiative took issue with Foran’s characterization, saying he was trying to “set up lawyers as straw men.”

Pressing for a Solution

“The Legislature looked at this like they do at other things and rejected it based on its substance,” said Harvey Rosenfield, coordinator for Citizens Against Proposition 51.

Public officials and business leaders have been pressing for a legislative solution to the liability question for nearly a decade, but the issue did not catch political fire until insurance companies recently began raising premiums for all types of liability coverage and in some cases denied coverage altogether.

Many California cities have decided to operate without any insurance and Lloyd’s of London, the huge re-insurance syndicate that stands behind most American insurance companies, has indicated it may stop doing business in the state.

While the Senate has passed liability reform measures in four of the last seven years, the Assembly has consistently rejected them. This year, Assembly Speaker Willie Brown (D-San Francisco), a trial lawyer who opposes such measures, has proposed legislation that would force insurers to offer coverage to cities, counties and other “bad risks.”

Lacks Business Backing

But neither Brown’s plan nor others advanced by a large number of lawmakers has the backing of the business groups and public agencies that have supported the Foran bill and are campaigning hard for the initiative. The campaign is expected to be one of the most costly for ballot propositions.

Under the state’s deep-pocket doctrine, those found at fault in an injury case can be required to pay the victim the entire court judgment, regardless of their percentage of blame. Foran’s bill, and the initiative, would guarantee victims full compensation for medical bills and other monetary damages under existing laws, but would limit non-economic damages to each defendant’s percentage of fault.

Peter Hinton, president of the 5,400-member California Trial Laywers Assn., denied his organization has any undue influence over the Assembly, contending that its rejection of the Foran bill was based on the knowledge that the legislation would do little to bring insurance rates down or guarantee adequate coverage.

‘An Outright Fraud’

Calling the bill and the initiative “an outright fraud,” Hinton said similar measures were enacted in Kansas and Iowa and did nothing to lower premiums or prevent policy cancellations there.

“The proponents like to attack lawyers, but this is a consumer issue, not a lawyer issue,” he said. “This picks the pocket of victims and consumers while only helping insurance companies and those cities and counties that do not wish to act in a responsible manner in maintaining their streets and highways. . . . Legislators are intelligent enough to see that and I think the voters will be too.”

Don Benninghoven, director of the League of California Cities, said Monday’s vote came as no surprise, since lawmakers do not want to interfere with a matter that already has been placed on the ballot.

But he said he was “irritated” that the Legislature could not have found a solution despite years of debate. “Millions of dollars will be spent on 10-second ads that won’t result in anything more than passage of the same bill the Legislature could have adopted itself,” he said.