Fifth Auto Insurance Initiative Wins Spot on November Ballot

The last of five auto insurance-related initiatives--one sponsored by the insurance industry, which would put strict limits on lawyers’ contingency fees--was certified for the November ballot Wednesday by the California secretary of state’s office.

Confirmation that the initiative had gathered more than the required 372,178 petition signatures of registered voters came just one day before the qualifying deadline for the election.

Under the contingency fee system, lawyers take cases for little or no fee, and collect from clients only if they win either settlements or in court trials.

Trial lawyers extol the system as a means of allowing those with scant financial resources to make legal claims without incurring out-of-pocket expenses. Critics of the system claim that the fees, in case of victory, are so high that claimants would be better off to negotiate claims themselves.

Under the proposed initiative, the fees would be limited in a wide range of cases, not just those that are insurance-related. Fees would be limited to 25% of the first $50,000 of an award, 15% of the next $50,000 and 10% of any amount in excess of $100,000. On a $1-million settlement or judgment, that would amount to a maximum $110,000 contingent fee.

An insurance industry statement Wednesday asserted: “Lawyers charge a standard 40% or more of the final settlement or judgment--a $400,000 fee on a $1-million award.”

However, members of the California Trial Lawyers Assn. said this is an overstatement. Depending on the complexity or length of cases, the fee may actually range from about 25% to as high as 40%, they said.

They maintain that the limits set under the initiative are so low that its passage would drive most lawyers out of handling contingency cases, thus depriving many people of recourse to the legal system.

The limits set in the contingency fee initiative are lower than the limits on such fees set in the insurance industry’s other initiative, one calling for creation of a no-fault auto insurance system.

The no-fault initiative, which would take precedence in auto cases if it passes and gets more votes, would limit attorney fees to 33% of the first $50,000, 25% of the next $50,000 and 15% of anything over $100,000. On a $1-million accident award, this would limit the fee to about $165,000.

A third initiative that has qualified for the ballot, financed heavily by the trial lawyers, would, if it passes and gets more votes, outlaw such fee limitations.

Private polls taken on both sides have indicated that the contingency fee initiative certified Wednesday will be hard to beat at the ballot box.

In another development, a representative of the coalition led by the Trial Lawyers Assn. acknowledged that its current advertising campaign being waged on radio and television against the insurers’ no-fault initiative is costing $300,000 a week. The coalition had said on Tuesday that the total cost of the ads is $300,000.

Insurance industry campaign coordinators, who checked purchases of advertising with various stations around the state, said they found that purchase commitments have been made four weeks in advance. They estimated the total cost at $1.3 million.

There have been estimates that overall expenditures in the insurance initiative campaigns will exceed $50 million.