Insurance Industry’s No-Fault Auto Initiative Certified for Fall Election

The California secretary of state’s office Friday announced it has certified for the ballot the insurance industry’s no-fault auto initiative, the fourth separate insurance measure to qualify for the fall election.

The announcement coincided with a statement by the president of the Assn. of California Insurance Companies that premium reductions under the proposed no-fault system would be greater in Los Angeles than the 7% to 17% range promised as a statewide average.

Responding to reports that the head of an insurance agents’ group had described the size of the reductions as uncertain for any given individual, Stan Zax said that while it is true the promised reduction is an average, in general there would be “substantial and reasonable . . . reductions for Californians.”

Level of Savings

“Since the savings are accomplished by eliminating cost of lawyers from the vast majority of automobile accident cases, the savings will be greatest in areas where the lawyers are involved in the highest percentage of cases--Los Angeles--and lesser where the positive effect of no-fault will be lesser,” Zax said.

As for assertions, since withdrawn, by Donald R. Stewart, the head of the American Agents Alliance, that some motorists could actually get an increase out of the no-fault system, Zax declared:

“In order to compute a rate increase, one would have to compare apples to oranges: a basic auto insurance policy, with a Cadillac, high-benefit no-fault policy. Basically, if you buy more coverage, you do pay more under any of the proposed initiatives.”

Under no-fault systems, policyholders are paid for damages suffered in accidents by their own insurance companies, regardless of who is at fault for the accident. Damage recoveries for pain and suffering and lawsuits are restricted to the most serious kinds of accidents, thus reducing the lawyers’ role in the insurance system and their fees.

Certified for the November ballot before Friday were competing initiatives. One would reduce payouts and premiums by a method other than no-fault. Two others would institute rate regulation, end antitrust exemptions and mandate premium rollbacks. Each of the certified initiatives received valid petition signatures of more than 372,178 registered voters.

A fifth initiative, sponsored by the insurers to slash lawyers’ contingency fees, may be certified Monday, the secretary of state’s office said.

The California Trial Lawyers Assn. has joined with Atty. Gen. John K. Van de Kamp and the Consumers Union in sponsoring one of the rate regulation initiatives, calling for 20% premium reductions for “good drivers” unless the insurance companies can establish an inability to finance such reductions. Consumer advocate Ralph Nader is backing another of the rate regulation initiatives, by the Voter Revolt organization, calling for 20% reductions for all drivers.

$50-Million Campaign Expected

Both of these initiatives oppose the insurers’ no-fault proposal, and a bitter campaign costing more than $50 million for all the competitors combined appears in prospect.

For example, Steven Miller, a spokesman for the coalition led by the trial lawyers, charged Friday, “The most obnoxious aspect of the insurance industry’s no-fault initiative is that it’s a Trojan horse to cloak what the initiative also calls for, the total prohibition of any regulation or public accountability of their operations.”

On the other side, an insurers’ spokesman, John Crosby, said: “The California Trial Lawyers Assn. is terrified of no-fault. . . . Twenty-six percent of every liability premium dollar goes to feed lawyers. It shouldn’t have to, and that’s what no-fault is about.”

In another development, meanwhile, the California Fair Political Practices Commission told the insurers it would take perhaps a long time for it to rule on the insurers’ recent complaint that the trial lawyers were illegally concealing their sponsorship of the initiative they support in various advertisements.

“This is an election year,” explained Christopher N. Heard, counsel of the commission’s enforcement division. “The complaint is under review, but we have a lot of cases and a staff of only five attorneys to handle the whole state.”