PROVISIONS OF THE INSURANCE MEASURES : PROPOSITION 104 No-Fault Insurance

Main Sponsor: The insurance industry.

Other Supporters: California, Los Angeles and San Diego chambers of commerce, California Farm Bureau Federation, California Trucking Assn., former San Francisco Mayor Dianne Feinstein, Assembly minority leader Pat Nolan (R-Glendale) and 15 other legislators.

Opponents: California Trial Lawyers Assn., Common Cause, Consumers Union, consumer advocate Ralph Nader, Atty. Gen. John K. Van de Kamp.

Key Provisions of Proposition 104 Rollback of Rates. Effective July 1, 1989, prices on the bodily injury liability, uninsured motorist and medical payment portions of auto policies would be reduced by a statewide average of 20% below the levels of Nov. 8, 1988, for a period of two years. Prices of other portions of policies would not be restricted.

Rate Regulation. Rate regulation called for in other initiatives would be preempted if Proposition 104 gets more votes. But, if during the two year period of the rollback it calls for, the commissioner found that a company had not lowered its rates by the required average 20% on the portions of policies affected, she could order the companies to do so.

No-Fault Insurance. Policyholders involved in accidents would be reimbursed by their own insurance companies for medical expenses, work loss and funeral benefits, regardless of who is at fault. Claim limits would depend on how much coverage is purchased by the policyholder. Property damage from collisions would be reimbursed as it is now, according to who is at fault.

Timeliness of Benefit Payments. Insurers would be required to pay benefits within 30 days or pay 18% annual interest on overdue amounts. But the 30-day period would not begin until the claimant provided “reasonable proof” of losses, “including the reasonableness and necessity of any medical expenses and the duration of any disability,” and the insurer completed its own investigation of the claim.

Suspension of Benefits. The insurer could suspend all benefits if the claimant “unreasonably refuses” the insurers’ request that he or she undergo medical treatment or medical rehabilitation.

Arbitration. Disputes between claimants and insurers regarding payouts of no-fault benefits would be submitted to arbitration, according to procedures established by the state insurance commissioner. The arbitrator could only award benefits, interest and attorney’s fees, unless payments had been delayed or denied by an insurer “without any substantial justification,” in which case the arbitrator could award treble the amount found to have been delayed or denied. Those refusing arbitration would not be permitted to sue insurance companies for bad faith. Similar arbitration rules would be introduced for other kinds of liability policies in addition to those involving auto accidents.

Lawsuits. Under most circumstances, suits would be permitted only when damages exceeded the maximum dollar amount of no-fault coverage purchased. But suits would be permitted against persons driving or riding in stolen vehicles, uninsured motorists, and persons involved in accidents who were engaged in felonies, hit and run driving or drunk driving.

Damages for Pain and Suffering. No person would recover such damages for personal injury unless the injury to the victim resulted in death, serious and permanent disfigurement or was both serious and permanent. An injury would be defined as serious only “if it has a substantial bearing on the injured person’s ability to resume substantially all of his or her normal activities and life style” and would be defined as permanent “only if its effects cannot be eliminated by further time for recovery or by further medical treatment and care, including surgery.”

Mandatory Medical Examinations. If a claimant wished to obtain pain and suffering damages for serious and permanent injuries, he would be required to offer the insurer the opportunity to conduct “an independent medical examination” to verify the nature of the injuries. If one did not do this, he could make no claim. Beyond that, the insurer could deny any benefits to the claimant if he refused its request that he submit to an examination.

Doctors’ Statements. Insurers against which claims had been made could require the victim’s doctor, hospital, clinic or other medical institution to furnish a written report of the “history, condition, prognosis, disability, dates of disability, treatment, and dates and costs of such treatment of the injured person, together with a sworn statement that the treatment or services rendered were reasonable and necessary.” Every person making a claim against an insurer would have to authorize the release of the required information.

Punitive Damages. Policyholders could not sue their insurance companies for punitive damages in disputes over payment of no-fault coverage benefits. But they could be recovered against reckless and drunk drivers and against insurance companies in lawsuits for amounts exceeding the no-fault limits.

Collateral Sources. Before collecting from insurers under this measure, one would first have to collect any available benefits from workers’ compensation or state disability. One could opt to buy a no-fault policy, at a lower cost, that would require that one’s health insurance also be used before collecting under the no-fault policy.

Good Driver Discounts. They would be permitted but not required.

Accident Surcharges. No insurer could cancel, refuse to renew or increase the rate charged for any policy solely on account of payment of benefits. But a company could determine the accident was the fault of the claimant and then raise his rates.

Attorneys’ Contingency Fees. Such fees in auto claims cases would be limited to 15% of any no-fault benefits recovered, 33.3% of the first $50,000 of benefits collected in excess of the no-fault limits, 25% of the next $50,000 of such benefits and 15% of any amount of such benefits above $100,000.

Fraud. The Bureau of Fraudulent Claims within the state Insurance Department would be given authority to prosecute cases of fraud it uncovered, if it was informed by a district attorney that cases would otherwise not be prosecuted. Insurance companies would continue to be assessed no more than $1,000 a year to finance the bureau, although the Legislature’s authority to make other appropriations would be increased.

Intervenor Funding. Provisions in Propositions 100 and 103 calling for insurers to pay the expenses of consumers’ representatives appearing in rate hearings or appeals would be preempted if this initiative got more votes.

Territorial Ratings. The present system under which people living in some neighborhoods are charged more for the same coverage than those living in other neighborhoods would be preserved.

Antitrust Exemptions. The insurance industry’s antitrust exemptions would be preserved and in some cases extended. But price-fixing would be prohibited.

Banks. Provisions in Propositions 100 and 103 allowing banks into the insurance business would be preempted if this initiative gets more votes.

Rebates. Provisions in Propositions 100 and 103 that would repeal the present bans on insurance agents giving rebates to customers out of their commissions would be preempted if this initiative got more votes.

Sex Differentials. The present system allowing the industry to charge those of one sex more than the other for the same coverage would be preserved.

Proof of Financial Responsibility. Penalties for those who are unable to establish proof of financial responsibility with the state after having had an accident would be increased from the present “infraction” to a “misdemeanor” in second and subsequent convictions.

Discrimination. Present bans on discrimination by reason of race, language, color, religion, national origin, ancestry or place of abode would be continued.

Conflicts of Interest. No one working for the state Insurance Department would be permitted to represent anyone before the department on any matter one had worked on, or was pending before one, for one year after leaving the department’s employ.

Disclosure of Information. Present bans on the Department of Insurance revealing publicly any information provided by insurers pertaining to specific claims or anything on product liability policies would be maintained.

General Preemption. All features of other initiatives on the November ballot insofar as they “relate to the business of insurance or the regulation of that business” by the state would be preempted in general if this initiative got a higher number of votes. This would supplement all the other preemptions.

Amendments. Provisions of the initiative could be amended only by a vote of two-thirds of the membership of each house of the Legislature or by a vote of the electorate, except for the provision banning banks from the insurance business, which could be changed by a majority vote in the Legislature.

Enforcement by Insurance Commissioner. The commissioner could fine an insurer, after a hearing, between $1,000 and $50,000, for violations of the terms of the initiative if the violation “amounts to a regular and ongoing business practice,” unless the insurer “reasonably believed that its conduct was lawful.”