Bill to Link Rate Cuts on Insurance to Prop. 51 Gains

An Assembly committee on Tuesday approved legislation by Speaker Willie Brown that would force insurance companies to cut their rates if voters pass Proposition 51, the so-called deep pockets insurance initiative.

In an often rancorous hearing, the Finance and Insurance Committee also approved several other measures by the Speaker to regulate the insurance industry. But faced with an avalanche of opposition, the committee postponed action on Brown’s most sweeping measure, a bill that would force insurance companies operating in California to provide coverage for cities and all other “bad risks.”

Brown (D-San Francisco) acknowledged that the bill was “screwed up,” hastily drawn and rife with errors. But he vowed to keep pushing for its passage unless the insurance industry shows a willingness to do something about spiraling insurance rates and the inability of many cities and private firms to obtain liability coverage at any price.

In all, the committee approved four insurance-related bills offered by the Speaker after several hours of debate in a room packed with industry lobbyists. Most of the measures are aimed at prodding insurers to find a way to provide coverage for the individuals, businesses and agencies that the industry now regards as uninsurable.

Among other things, the bills, which now go the the Assembly floor, would:

- Require insurers to make available a minimum level of auto insurance coverage to drivers in “high-risk” areas of the state. Such insurance would cover only such direct costs as medical bills and funeral expenses. The bill, heavily opposed by consumer groups, is aimed at drivers who cannot afford the “assigned-risk” policies but who continue to drive in violation of the state’s mandatory auto insurance law. Opponents contend that it would force other drivers to buy more coverage to make sure they are protected.

- Prohibit midterm cancellations of policies held by businesses or government agencies unless they failed to pay, were “grossly negligent” in their safety records or obtained the coverage under fraudulent circumstances.

- Require insurance companies to provide specific information on their premiums, losses, expenses and damage awards to the state insurance commissioner. The measure is aimed at determining the extent of the state’s insurance crisis.

Brown earlier this year made insurance reform a top priority. And he was clearly concerned about the prospect of losing one or more of his bills in their first committee hearing.

To bolster his chances of success, the powerful Speaker earlier Tuesday took the rare step of removing from the committee Assemblyman Dave Elder (D-Long Beach) and appointing in Elder’s place one of his top lieutenants, Democratic Floor Leader Mike Roos of Los Angeles. Roos then led the fight for the bills, and repeatedly attacked the testimony of insurance industry lobbyists. Elder, who was away from the Capitol, could not be reached for comment.

Calls In Members

Later, when it appeared that Brown would fall two votes short on one of his bills, he ordered the committee’s sergeant at arms to bring in two Democratic members who were attending hearings elsewhere in the Capitol.

Brown’s unusual, aggressive maneuvering appeared to salvage most of the bills, not only eliciting support from committee members but at times holding the industry lobbyists entirely at bay.

In the case of his legislation to force insurance companies to cut their rates if voters approve Proposition 51, representatives of the insurance industry, who usually oppose any attempts by government to regulate premiums, did not even testify.

The measure, which was approved on a vote of 9 to 0, seeks to force the industry to make good on predictions that approval of the ballot initiative would reduce judgments in injury awards and eventually lead to lower insurance premiums.

The initiative, which is sponsored by a long list of private businesses and government agencies, as well as the insurance industry, would limit a co-defendant’s share of damages for pain and suffering in an injury lawsuit to that defendant’s percentage of fault. At present, a co-defendant partially at fault can be forced to pay all of the judgment if other defendants are unable to pay.

‘Put Up or Shut Up’

The Speaker’s bill does not dictate how much premiums should fall if the initiative passes, but it stipulates that any premiums which do not fall are, by definition, “excessively high.” That would mean an automatic review by the state insurance commissioner, with the likely outcome an order cutting premiums.

“This means you put up or shut up,” Brown said of the insurance companies’ support for the ballot initiative.

But Brown, who opposes Proposition 51, conceded that it would take at least a year after passage of the initiative before any such order would be issued.

Concerning his heavily opposed bill that would require insurance companies to cover all kinds of bad risks, Brown flatly rejected predictions by insurance lobbyists that its passage would force most companies to flee the state.