Insurance Reform Plan by Brown All but Dead

Six months ago, as lawmakers prepared for the reelection season, Assembly Speaker Willie Brown, in a rare televised speech from the Assembly chamber, declared that insurance reform would be his top priority for 1986.

Calling on his colleagues to “address this issue,” the San Francisco Democrat laid out an ambitious plan to resolve the emerging liability crisis that was forcing cities and many individuals to go without coverage.

But with the legislative session drawing to a close next month, much of Brown’s package of insurance bills is in trouble. Two of his most important measures--one to reduce liability rates and the other to force insurers to take bad risks--are stalled in the legislative machinery and appear all but dead.

On Wednesday, another key proposal designed to provide cheaper auto insurance for those who live in high-risk inner-city areas was unceremoniously dropped in the face of overwhelming opposition.

“I can’t get the votes, it’s very simple,” Brown said of his auto insurance measure when it became clear that the Senate Insurance, Claims and Corporations Committee had no intention of approving it. As a result, the bill was assigned to a between-sessions legislative study.

This has been a familiar story to Brown as insurance company lobbyists have managed to hold back a tide of bills aimed at further regulating the industry and reducing rates.

Brown said he intends to take provisions from some of his stalled bills and place them in legislation that is still alive in hopes of achieving success before the Legislature adjourns Aug. 29.

As part of his January call for action, Brown noted that several insurance bills introduced by his colleagues appeared likely to pass. Among those is a measure by Assemblyman Dan Hauser (D-Arcata) that would establish a state fund to insure local governments that have been hit particularly hard by the insurance crises.

“We did not get everything we wanted in every single bill,” Brown said. “But that’s the legislative process.”

Of 20 bills that were introduced in the Assembly and Senate, Brown said that probably six to eight would reach Gov. George Deukmejian. “So we haven’t had a bad year against the insurance industry,” he said.

Of the seven insurance bills that Brown carried, two remain on track. The pair, which won easy approval Wednesday in the Senate committee, would require that insurers disclose much more about their own financial condition and bar the industry from canceling most policies in mid-term.

Brown’s interest in insurance reform was prompted in large part by a rising tide of protests over the difficulty that cities and businesses were experiencing in obtaining reasonably priced liability coverage. The Speaker also was hearing complaints from his colleagues in urban areas that “redlining” and similar practices made auto insurance virtually unobtainable in many of the state’s poorest communities.

Agenda Changed Suddenly

But Brown’s legislative agenda changed abruptly after voters in June overwhelmingly approved Proposition 51, the so-called “deep-pockets” initiative that limits the amount of damages many co-defendants must pay in personal injury lawsuits.

Brown, a trial lawyer, opposed the measure and maintained throughout the campaign that insurance company greed and mismanagement were responsible for the continuing insurance crisis.

One of Brown’s most controversial bills would require insurance companies to reduce rates on liability policies on the theory that insurance companies will save money as a result of Proposition 51’s passage. While it appeared well on the road to passage, Brown all but guaranteed its demise by recently adding a provision establishing a state board to review insurance rates.

Insurance companies adamantly opposed it and sources in the Legislature labeled the measure “moribund.”

Similar Opposition

The auto insurance bill that Brown agreed to withdraw Wednesday faced similar insurance industry opposition. But consumer groups, in a surprise move, also fought hard for its defeat.

The measure would have allowed uninsured drivers to buy a minimum level of liability coverage at lower rates. Brown said his intent was to allow those in “redlined” areas to buy insurance at a reasonable cost and comply with the state’s mandatory auto insurance law.

Critics, however, feared it would provide little or no protection to those injured in an accident. One consumer group ran a large newspaper ad attacking Brown, angering the Speaker, who publicly derided its author as “a jerk.”

But on Wednesday, that rift appeared forgotten as Brown was praised by consumer activists for his overall efforts to regulate the insurance industry.