End to Antitrust Shield for Insurers Wins Test

In a victory for those seeking change in the state’s insurance laws, the Assembly Judiciary Committee on Wednesday approved a bill that would end the immunity the insurance industry now has from state antitrust laws.

Assemblyman Patrick Johnston (D-Stockton) provided the vote by which the legislation cleared the committee after intense lobbying by Assembly Speaker Willie Brown (D-San Francisco), Atty. Gen. John Van de Kamp, California Trial Lawyers Assn. President Brown Greene and aides of the Consumers Union.

Effect of Amendment

But Johnston--who earlier had been an opponent--cast his vote only after the bill’s sponsor, Assemblywoman Maxine Waters (D-Los Angeles), agreed to a compromise amendment.

Under the amendment, Waters’ bill would not go into effect if another bill, that would give the state Insurance Department veto power over substantial fluctuations in insurance rates, becomes law. That so-called “flex-rating” bill received committee approval Tuesday.

The compromise means the insurance companies could face rate regulation, or could lose their antitrust exemption, but not both at the same time.

After the vote, proponents of both bills said they believe that Gov. George Deukmejian is far more likely to sign a bill lifting the antitrust exemption than the rate control bill. They noted that Republicans on the Judiciary Committee all abstained Wednesday on the antitrust bill, while Republicans on the Finance and Insurance Committee Tuesday voted against the rate control bill.

Van de Kamp Appeal

In a strongly worded speech before Wednesday’s vote, Van de Kamp called on the legislators to end what he called “a fundamentally unhealthy pattern of collusive conduct” on the part of the insurance industry. Van de Kamp has begun to make insurance a major theme as he develops a possible 1990 campaign for governor.

Nothing in state law now, the attorney general said, “prohibits insurance companies from fixing rates, from agreeing not to compete, from allocating territories to one another, from obtaining and exploiting a monopoly in any line of insurance. And no other industry enjoys this kind of sweeping exemption from the antitrust laws.”

Clay Jackson, chief Sacramento lobbyist for the insurance industry, insisted there is already “an intense amount of competition” in the industry and there is no need to lift the exemption.

After the vote, Van de Kamp said this week’s votes mean “we’re still alive. It keeps on the pressure for reform.”

Harry Snyder, West Coast director of the Consumers Union--which has supported lifting the industry’s state antitrust exemption for three years--said it is becoming apparent that the 1987 Legislature “is (providing) the best chance we’ve ever had. . . . There is a very high likelihood that we’ll get insurance reform this year.”

Industry’s Reaction

A spokesman for the insurance industry, George Tye, said the lobby was surprised by Johnston’s switch and the committee approval. “The fight isn’t over yet,” Tye said. But he conceded that the amendment agreed to by Waters “was a very clever political move.”

In another action, the Senate Insurance, Claims and Corporations Committee approved a bill by its chairman, Sen. Alan Robbins (D-Van Nuys), that would allow the California Assigned Risk Plan to sell comprehensive and collision coverage for automobiles in addition to the minimum required liability coverage it sells now.

This change also had been supported by the Consumers Union and opposed by the insurance lobby.