Judge Rejects Suit to Stop State Farm’s No-Fault Donations

A Superior Court judge on Friday refused to order State Farm insurance company, the largest auto insurance seller in California, to cease its contributions to the insurance industry’s no-fault initiative campaign, ruling that such an action would be a prior restraint of corporate free speech.

Judge Barnet M. Cooperman dissolved a temporary restraining order he issued Aug. 16 against further State Farm contributions to the campaign, and he dismissed a suit brought by Claremont attorney William Shernoff, a former president of the California Trial Lawyers Assn. and a major contributor to consumer groups.

Although the judge said he recognized that many of State Farm’s policyholders would find its projected $4 million in total contributions to the industry’s campaign “repugnant,” he said that under legal precedent he has neither the power nor the authority to order the contributions to cease.

New Suit Possible

He suggested instead that Shernoff might bring a new suit seeking compensatory refunds to policyholders opposed to the contributions, or possibly seeking partial limits on State Farm contributions, depending on how many policyholders object to what the company is doing.

Although Shernoff first said he felt that such steps could not practically be taken before the Nov. 8 election, he said later in the day that he will bring an alternative action before Cooperman in the next two weeks.

Cooperman said there is “a clash” between State Farm’s free speech rights as a corporation and the free speech rights of policyholders who don’t like how the company is spending money they pay in premiums. But, he said, there is no legal way he can ban all contributions.

Only Company Named

Of hundreds of insurance companies and industry trade associations that have been giving to the insurers’ projected $43-million campaign to pass two insurance initiatives and defeat two others, State Farm was the only party mentioned in the suit.

However, it is not only the largest single contributor, but documents provided to The Times and confirmed by industry campaign coordinators also show that it has played a decisive role in fashioning the insurers’ campaign.

It was State Farm, backed by other out-of-state insurance companies, that insisted last winter that the industry go forward with a no-fault initiative this year, rather than support the more limited Polanco initiative, which has also qualified for the November ballot.

Numerous Provisions

The no-fault initiative, Proposition 104, which would set up a system wherein accident victims would collect from their own insurance companies regardless of fault, also contains 80 pages of other provisions and exemptions that address a list of concerns about the auto insurance industry.

The Polanco initiative, Proposition 101, which is being supported by the dissident Coastal Insurance Co., simply cuts bodily injury liability premiums in exchange for restrictions on damage pay-outs, and it would expire after three years.

According to the documents, industry campaign coordinator Clint Reilly originally advised the state’s insurers that the Polanco measure--named for its author, Assemblyman Richard Polanco (D-Los Angeles)--would be easier to pass and, by a vote of 36 to 22, companies represented at the meeting voted to support it rather than no-fault.

Carried the Others

But, the documents show, State Farm, Allstate and other companies whose corporate headquarters are outside California said they would only contribute to no-fault and they finally carried the others along.

Reilly has confirmed this in general terms.

Despite Cooperman’s dismissal of the Shernoff suit Friday, a spokesman for the Proposition 100 campaign, an opposing initiative supported by the California Trial Lawyers Assn. and state Atty. Gen. John K. Van de Kamp, said that campaign would continue to air a commercial that castigates the State Farm contributions.

A man appearing in the ad complains to two fellow State Farm policyholders, “So we end up paying high insurance rates to support a campaign we’re opposed to.”

The commercial concludes with the three laughing, “We’ll all vote no!” on the insurers’ initiatives, thus getting back at the company.