Bid to Qualify 5 Insurance Initiatives Is in High Gear

Negotiations to avert a “war of initiatives” on auto insurance by reaching a compromise acceptable to the Legislature and Gov. George Deukmejian have gotten nowhere, and major efforts to qualify at least five ballot initiatives on insurance for the November election are already under way or shortly to begin.

Insurance industry representatives have announced plans to begin within the next 10 days a major advertising campaign on behalf of a proposed insurers initiative instituting a no-fault system, banning most lawsuits over auto accidents, limiting trial lawyers’ contingency fees and giving policyholders an average 20% rollback in liability premiums.

“The eyes of the insurance industry are focused on California this year,” said industry lobbyist George Tye last week, “and the outcome of this battle is very important to the industry nationally.”

Meeting of Lawyers

The board of the California Trial Lawyers Assn., meanwhile, is scheduled to meet Tuesday amid strong indications it will throw its weight behind an initiative offered by Steven Miller of the Insurance Consumer Action Network. This measure would establish limited rate regulation of the insurance industry, give “good drivers” a 20% discount and preserve lawsuits and the trial lawyers’ prerogatives.

Under the scenario being considered, the trial lawyers would abandon an initiative of their own in favor of the Miller initiative, backed also by the California Bankers Assn. and, probably, Atty. Gen. John K. Van de Kamp.

The insurers and the trial lawyers over the years have been persistent antagonists. As insurance prices have increased, leading to public unhappiness, the two groups have quarreled over which should sacrifice income to stop the increases.

About half of the trial lawyers’ cases relate to auto accidents, and this is a major source of their income, as well as being a major cost to insurers. In general, the insurers argue that a cutback in litigation is the way to reduce premiums, while the lawyers say insurers are making plenty of money and should be forced, through regulation, to hold down their rates.

Besides the initiatives backed by the big rivals, ballot qualification efforts have also gotten under way for three so-called “independent” initiatives. Despite that label, all three have leanings toward either the insurers or the trial lawyers.

Supported by Nader

The “independent” effort that is getting the most notice at present is one being advanced by the Access to Justice organization under the name “Voter Revolt to Cut Insurance Rates.” Supported by national consumer advocate Ralph Nader, it would cut all liability insurance rates, for homeowners and commercial insurance as well as auto insurance, by 20%, give another 20% discount for “good drivers,” mandate stiff rate regulation of the insurance industry and remove the industry’s antitrust exemptions.

While the “revolt” initiative leans toward trial lawyer positions, the trial lawyers say it is too extreme. Trial lawyer president Gary Gwilliam met last week with its coordinator, Harvey Rosenfield, and reportedly complained sharply that Rosenfield, who used to be supported by the trial lawyers, has strayed off the reservation. Rosenfield, for his part, now says he doesn’t want trial lawyer money. His campaign manager, Bill Zimmerman, however, doesn’t sound so sure on that point.

The other “independent” efforts are being mounted by Assemblyman Richard Polanco (D-Los Angeles) and Adam Burton, a former aide to Rep. Augustus F. Hawkins (D-Los Angeles) and Los Angeles County Supervisor Kenneth Hahn.

The Polanco initiative leans toward the insurers’ positions against the trial lawyers but goes further with rate cutbacks than the industry would like. It mandates a 50% reduction in auto bodily injury liability rates in exchange for limiting the amount of damages that can be collected for some kinds of losses and discouraging lawsuits by limiting lawyers’ fees.

The Burton initiative is focused primarily on doing away with the territorial rating system under which drivers living in inner-city areas often have to pay the highest insurance rates. Although, in most respects it leans with the trial lawyers against the insurers, this initiative basically sides with people with low incomes and the urban dwellers who under state law are required to carry auto insurance but often cannot afford it.

One Struggling

A sixth initiative, being sponsored by the Consumers Union and the Center for Public Interest Law, has been struggling to win financial backers, and may not go forward even so far as collecting signatures on qualifying petitions. Ironically, this initiative, with its combination of “good driver” discounts, rate regulation, a no-fault system and limits on damage recoveries, is the only one that is balanced against both the insurers and trial lawyers.

In order to qualify for the ballot, each initiative campaign must submit 372,178 signatures of registered voters within 150 days of beginning the qualification process. It often costs circulators hundreds of thousands of dollars to amass that many.

With interest in insurance issues and outrage over premium prices at a high level, it would normally seem certain that some of the initiative efforts would qualify, bringing the issues to the voters to decide. This is all the more true since the insurers and the trial lawyers have arranged for the state’s two professional circulating firms to work for the initiatives they favor, and these firms have a record of success.

But, in fact, it is conceivable that none of the proposed insurance initiatives will actually reach the ballot.

Gwilliam, the trial lawyers president, said in a series of interviews that the trial lawyers would prefer to avoid a fight, which he said could cost all sides together about $50 million.

He suggested that if none of the “independent” initiatives manage to qualify, then in late May, when the practical deadlines for qualifying arrive, the insurers and the trial lawyers might yet reach an agreement on dropping their initiatives.

Negotiations of Adversaries

A little-noticed change in the law, adopted last year by the Legislature and signed by the governor at the request of both sides, allows those who circulate initiative petitions to negotiate among themselves about resolving their differences and never submitting the petitions to the authorities.

It is likely, Gwilliam said, that out of such negotiations would emerge a compromise on the issues that would be offered to the Legislature for enactment, although he remarked that he thought 80% of the sacrifices should come from the insurers and only 20% from the trial lawyers.

The insurers take a diametrically opposed position on what should be the balance of sacrifices.

The Legislature, most of whose members receive thousands of dollars in campaign contributions from one side or the other, or sometimes both, is usually inclined to enact what both the lawyers and the insurers can agree upon.

But since the two sides are so far apart on the question of who should bear the burden for reducing rates, some legislators interviewed say it is far more likely that both sides would agree only on dropping their initiatives, thus preserving the status quo, and that no package would be submitted to the Legislature.

Of the next few months, Gwilliam said, “We’re going to do some campaigning. We’ll come out with some ads against the insurers’ no-fault proposal. . . . We’re going to start circulating petitions and wait to see what happens. . . . If it comes down to only one out there (ready to qualify), we could pull ours.”

The talks with the insurers “haven’t been suspended,” he said. “They haven’t said they don’t want to talk.”

Taking a somewhat different tack, however, was Stanley Zax, president of the Assn. of California Insurance Cos., the lobbying organization that has been instrumental in putting together the industry’s initiative.

Insurers’ Position

Zax said that unless the trial lawyers come around to accepting limits on their profits from litigating insurance cases, he believes it would be too embarrassing for the insurers to drop their initiative at the last moment.

“We have no alternative,” Zax said. “There either has to be legislative reform without an initiative, or there has to be reform at the ballot box. Or there will be a calamity that will force reform later.”

The trial lawyers, he said, “benefit economically from a system (of litigation) that continues to escalate costs. Their income is doubling every five years. The problem is growing. . . . We can’t see running a system that continues to deteriorate. The fraud, the costs, the litigation, all are getting worse, and the public is getting angrier and angrier and angrier.”

In short, he said, on auto insurance the time has come for action. “The problems are real, and they must be dealt with.”

Notwithstanding such talk, some observers in the Legislature and elsewhere believe that, faced with a multimillion-dollar campaign that one or the other would lose, both the trial lawyers and insurers will angle to create a situation where there are no initiatives on the ballot. They speculate that this could involve their putting muscle on the “independent” organizers not to submit their petitions, even if they have gathered sufficient names.

A legislator who has been close to the insurance situation for years had this analysis:

“Is there any chance they can keep this thing from coming to the ballot? Yes. But it would take a series of things to happen, not any of which is in the control of any one person.

“If Burton, Consumers Union and Access to Justice fail, if the trial lawyers have withdrawn their own initiative, if the insurers withdraw theirs, if the only two on the path to qualifying are (Miller-trial lawyers) and Polanco, then there’s a strong likelihood that late in the game both will announce (falsely) they don’t have enough signatures to qualify, or something to that effect. It would mean the insurance companies would make a deal and control Polanco, and the trial lawyers control Miller.”

Withstanding Pressure

All of the “independent” initiative organizers insisted in interviews they would be impervious to such pressure.

But Miller, while saying he, not the trial lawyers, will physically control the petition signatures that are collected for the initiative he has drafted, qualified his denial. “If I have an opportunity to get my initiative written into law without raising and spending $10 million, I’d be foolish not to take it,” he said, indicating there are circumstances in which he would withdraw the initiative. What seems clear is that if any of the “independent” initiatives qualify, with the possible exception of Burton, then both the insurers and trial lawyers will feel constrained to go ahead with the qualification of their initiatives if only to defend their interests. The long-heralded all-out battle over major change in the insurance laws would then take place.

Burton is the exception because of a widely held perception that an initiative striking down territorial rating, since it would likely mean insurance price increases for about two-thirds of the electorate, would have little chance at the polls. In other words, both the insurers and lawyers could allow it to reach the ballot without too much fear of seeing their economic interests defeated at the polls.

Chances Assessed

As for the three other “independent” efforts, the view among a number of political consultants, legislators and others who were interviewed was that Consumers Union has little chance to get enough signatures to qualify, that Polanco has perhaps an even chance and that Access to Justice/Voter Revolt may have a better than even chance.

This is an assessment of their capacity to gather the signatures, not their political will to actually file them in the face of opposing political pressure.

All the “independents,” however, said they view their success in qualifying as virtually certain, despite the fact that all lack the services of the two big professional circulating firms.

“We’re on target,” Polanco said. “We’ve got 50,000 to 55,000 signatures already.”

Rosenfield said that initial public response to a first mailing and household canvassing convinced him that his initiative will qualify, and well before the deadline.