Insurers Push Initiative for No-Fault Car Policy

Insurance industry representatives Thursday unveiled a proposed 1988 ballot initiative that would institute a sweeping no-fault system in California automobile insurance, giving policyholders an average 20% rollback in liability premiums and freezing the rates for two years.

Under the plan as submitted by an alliance of the state’s leading insurance agents and company associations and its largest insurance lobby, most lawsuits in automobile accidents would be banned. The exceptions would be those involving injuries that are both “serious and permanent,” those against convicted drunk drivers and suits for economic losses above the no-fault limits. Lawyers’ contingency fees would also be sharply limited.

Another part of the industry initiative would make null and void any other insurance initiative passed by voters next year that received fewer votes than the industry measure.

Under a no-fault system, a person’s losses are paid by his or her insurance company regardless of who is at fault.

The industry proposal introduced a controversial new element into the developing battle over various proposals for lowering auto insurance costs in California.

At least seven initiative efforts have already been promised on the subject, and just Thursday the insurance industry’s political rival, the California Trial Lawyers Assn., filed its own initiative, calling for a 25% decrease in auto insurance premiums for “good drivers” having no more than one traffic ticket on their record.

The trial lawyers’ initiative contains a number of other features, such as a mandatory revocation of driving privileges for anyone under 21 who gets even one ticket.

But it would not be as sweeping in its total effects as the insurance industry proposal with its ban on most lawsuits. That prohibition would almost certainly cut deeply into the trial lawyers’ income by reducing the lawsuits that sustain them.

Prepared for Fight

The trial lawyers made it clear Thursday that they will fight the industry initiative, if it qualifies for the ballot, with their customary massive finances.

W. Gary Gwilliam, president of the Trial Lawyers Assn., declared:

“The no-fault concept in our law is outdated. It is a concept whose time has come and gone. It was rejected by the California Legislature 10 years ago. Other states have seen it become a failure. It has not reduced rates anywhere.”

This last statement was partially challenged by the insurance industry representatives who unveiled the no-fault initiative at a Sacramento news conference. They said that in New York and Florida, the states with the most comprehensive no-fault systems, the rate of insurance premium increases has been far less than in recent years in California.

Gwilliam said he believes consumer organizations and many others will join the lawyers in opposing the industry initiative.

But at the same time he expressed hope that the insurers and the lawyers could yet negotiate a legislative compromise that would make an initiative battle unnecessary. “I think auto insurance is going to be at the top of the legislative agenda in January,” he remarked.

In introducing the insurance initiative, Stanley Zax, president of the Assn. of California Insurance Companies, also expressed a hope that negotiations may yet resolve the situation.

Truce Apparently Dead

But, although both sides denied it, it appeared to some participants in the auto insurance debate Thursday that the filing of the contradictory insurer and trial lawyer initiatives marked the end of a truce worked out last summer between a business-insurer coalition and the Trial Lawyers Assn. Under this agreement, neither side was to attack the other in an initiative or in legislation for five years.

“The truce is dead as a doornail,” said Harvey Rosenfield of the Access to Justice group that is proposing its own initiative rolling back auto insurance premiums, though not through a no-fault system. “I thought their compromise was an assault on the democratic process anyway.”

The proposed insurance initiative, which like the other proposed initiatives will require 372,178 signatures of registered voters to make the ballot, contains these major features:

- In place of the present mandatory liability insurance, California drivers would be required to carry a no-fault policy providing for $10,000 in medical expenses, up to $15,000 in lost wages and a $5,000 funeral benefit. A small bodily injury liability rider would also be included.

- A mandatory two-year 20% rollback of the average statewide premium for bodily injury, liability and uninsured motorists coverage. For drivers who also carry other policy options, such as collision and comprehensive coverage, the overall premium reduction would vary from 7% to 17%.

- The companies would guarantee payment of all valid claims under the no-fault system within 30 days of a request. Late payments would subject insurance companies to an 18% interest penalty.

- Contingency fees that lawyers could charge in those “serious and permanent” injury cases that do result in lawsuits would be limited to 33.3% of the first $50,000 of a damage award, 25% of the next $50,000 and 15% of all amounts greater than $100,000. Right now these fees often range up to 50%.

- Insurance companies would be prohibited from raising premiums or from canceling or refusing to renew auto policies solely because of claims made for no-fault benefits.

Insurance representatives said the “serious and permanent” injuries for which suits would still be permitted are defined as anything that prevents victims from “doing substantially all of the activity they did in their employment and that cannot be repaired by passage of time and surgical techniques.”

Death and permanent disfigurement would be considered serious injury and a lawsuit would be permissible.