3 Times More Than in Any State Campaign : Insurers Expect to Spend $43 Million on Initiatives

The insurance industry will spend $43 million--more than three times the amount ever spent on a California election campaign--on its drive to pass its insurance initiatives and to oppose two competing measures on the November ballot, it was announced Thursday.

The insurers’ campaign coordinator, Clint Reilly, said the industry decided to go out front now with the total figure--$20 million more than its original estimate--so the electorate would get used to and be able to evaluate those spending facts now rather than later in the campaign.

The $43-million total is projected to cover the industry’s campaign for its no-fault auto initiative and another ballot measure to slash lawyers’ contingency fees, as well as to oppose two competing initiatives, one backed by the California Trial Lawyers Assn. and another by consumer advocate Ralph Nader.

The amount more than triples the $13 million spent individually by both Gov. George Deukmejian and Sen. Alan Cranston in their reelection drives two years ago--previously the most expensive campaigns in state history. But Reilly said he believes that the insurers are really waging four separate campaigns in the initiative battle so it is unfair to compare the total figure with any one campaign in the past.

There have been estimates that the trial lawyers’ competing insurance initiative campaign will cost about $20 million. And, it has been announced, another $10 million will be spent on behalf of the Polanco initiative, yet another insurance measure supported by a maverick insurance company executive.

The Voter Revolt organization sponsoring the Nader-backed initiative has said it may spend $2 million.

If these estimates are correct, and some believe that they may be too conservative, at least $75 million will be spent in the insurance battle--which is basically a struggle between insurer and trial lawyer interests to put the burden of sacrifices for lower rates on the backs of the other.

California has never seen anything like a $75-million political contest. When Cranston and Republican congressman Ed Zschau spent $25 million between them in 1986 fighting for a Senate seat, that was widely regarded as an extravagant campaign.

Necessary Amount

But Reilly said Thursday that, as far as the insurers go, $43 million is necessary “to clearly show people that we’re serious about no-fault as the industry’s reform agenda” and to make “fairly small” efforts to pass the contingency fee limits and fight the lawyers’ and Nader initiatives.

In addition, he said, the insurers’ campaign is incurring heavy expenses just in coordinating company efforts on behalf of the campaign, as well as accurately reporting all the contributions.

Reilly disclosed that in its first contribution and spending report to be filed today, the industry will list $13.9 million spent in cash and another $2.5 million in in-kind expenditures for the first seven months of the year--a total of $16.4 million. In-kind expenditures are mainly funds spent by insurance companies on their own to supplement the official industry campaign.

Further Spending Plans

The $16.4 million by itself is more than has ever been spent in a California campaign, and this campaign has three months to go.

Reilly said that plans call for the insurers to spend another $17 million between now and November to advance Proposition 104, the no-fault measure, $6 million on behalf of Proposition 106, the slash in lawyers’ contingency fees, and about $3.5 million each on campaigns to defeat Proposition 100, the lawyers’ initiative, and Proposition 103, the Nader initiative.

Both of the lawyer and Nader initiatives call for rate rollbacks, rate regulation and a lifting of industry antitrust exemptions, concepts that are anathema to the industry, in part because they are unaccompanied by legal changes that would save the insurers money.

The insurers’ no-fault proposal, on the other hand, contains a promise of an average 7% to 17% rollback in premiums to be funded by curtailing lawsuits and restricting some damage payments.

No-Fault System

Under no-fault, policyholders collect damages from their own insurance companies regardless of who is at fault in the accident. Lawyers’ contingency fees, the subject of the other insurers’ initiative, refers to the system whereby trial lawyers take cases for no initial fee, collecting a fee later only if they win.

Reaction to the insurers’ funding announcements was quick from other campaigns.

Steven Miller, chairman of the trial lawyers’ campaign, which is also supported by Atty. Gen. John K. Van de Kamp, the California Bankers Assn. and the Consumers Union, demanded that state Insurance Commissioner Roxani Gillespie launch an investigation.

“We’re faced now with an outrageous level of spending by the insurers, using policyholder money to fund a campaign in insurance industry interests and against policyholder interests,” he said. “The taking of policyholder money to use against consumers ought to be investigated.

‘It’s Not in the Cards’

“We simply do not know now” how much will be spent on the lawyers’-backed initiative, Miller said, “but it’s not in the cards for us to spend anywhere near what the insurers are spending.”

The lawyers’ campaign recently reported that it had spent $2.19 million through July 1. Since then, it has been spending about $300,000 a week on television advertising.

Assemblyman Richard Polanco (D-Los Angeles), head of the Polanco campaign, said Thursday that the insurers’ spending plans are “outrageous. It’s a clear indication of how much they are willing to fog or camouflage a mean-spirited proposition.”

The chief financial backer of Polanco’s campaign, Coastal Insurance executive Harry Miller, who has given $1.9 million already and promised as much as another $3 million for that effort, said of the $43-million plan: “It is surprising to me that if no-fault is in the public interest, it will take that kind of money to sell it to the voters.”

‘Support Must Be Way Down’

Bill Zimmerman, manager of the Nader-backed initiative, the only one not to draw major financial support from either insurers or trial lawyers, said: “My guess is that their (the insurers’) financial support must be way down for them to have increased their budget by a factor of two (over an original projection of $20 to $23 million). The only time you double your budget is when your campaign isn’t working.”

In an interview Wednesday in his San Francisco office, however, Reilly said polling the insurers have done indicate that with enough of a campaign, no-fault will prevail over the other efforts.

The no-fault initiative carries a provision that should it get a bigger majority than the other measures, it will preempt them, even if the others also win majorities. Voters may vote for as many of the initiatives as they wish.