When Initiatives Collide

On Election Day, millions of Californians may find themselves guilty of breaking the law. A little-known section of the state’s election code limits voters to no more than 10 minutes in the voting booth--a dire challenge when confronted with 29 state propositions dealing with everything from job safety to automobile insurance.

Why are voters faced with such a brain-numbing set of policy choices on complex legislative issues? The answer begins with greed and weakness and frustration. It is a tale of legislators serving as coat-holders for powerful special interests locked in bloody combat over political and economic turf. Of a governor unwilling to exercise leadership, even in a crisis. Of a system that forces politicians to be more responsive to the demands of groups that fund election campaigns than to constituents’ concerns.

The initiative process, begun as a defensive weapon against special-interest domination of the Legislature, has become just another battleground for those interests. Nowhere is that clearer than in the glut of insurance-reform initiatives on the Nov. 8 ballot.

The insurance crisis did not sneak up on Sacramento. In the mid-’70s, the skyrocketing costs of medical malpractice insurance led doctors and insurers--two major contributors to California politicians--to pressure the governor and Legislature to enact reform. In 1975, legislation was passed limiting personal-injury damages resulting from malpractice.

The current crisis erupted in 1984, when insurance companies dramatically increased commercial liability insurance rates and cut back on coverage. That led in 1986 to Proposition 51--the so-called “deep pockets” initiative, intended to cut the size of damage awards in personal injury and product-liability cases. But insurance rates didn’t go down after 51 passed, as some supporters promised, and the Legislature didn’t follow it up with bills to overhaul the state’s liability system, as others had predicted.

By the time the next round of insurance wars pitted insurers and trial attorneys against one another over soaring auto premiums, it had become impossible to affect reform through the Legislature.

Why? Because, as Atty. Gen. John Van de Kamp observed, “The outrageous escalation of campaign spending has led to legislative breakdown.” According to a Consumers Union study, from 1985 through 1987, California’s property- and casualty-insurance industry gave legislators almost $3 million in campaign contributions; Gov. George Deukmejian got nearly $500,000. In 1987, the casualty-insurance industry was the largest special-interest political contributor in the state; trial lawyers ranked second. As the Legislature felt growing public pressure to curb insurance costs, there was a concurrent rise in campaign contributions from special interests whose livelihoods would have been affected by such curbs.

The insurance industry pressured legislators to lay off rate regulation and attack the problem instead by limiting auto accident damage awards, either through the introduction of a “no fault” insurance system or by limiting attorneys’ fees. That anti-regulation stance found favor in Sacramento with Republicans and some conservative Democrats.

Trial lawyers, arguing that the insurance companies are the real villains, put pressure on the Legislature to cut insurance rates rather than limit payments to accident victims (and to attorneys). The lawyers’ legislative allies include Speaker Willie Brown of San Francisco, Senate President pro tem David Roberti of Los Angeles and other Democrats.

Neither group has the clout to force a legislative settlement favorable to its own interests, but both are powerful enough to block unwanted bills. As a result, legislators were neutralized or polarized by carefully targeted campaign contributions; legislative leaders, loath to alienate major supporters on either side, offered little direction. Deukmejian, meanwhile, remained almost invisible on the issue of insurance reform. The level of public frustration increased dramatically.

On the last day of the 1987 legislative session, sweeping tort reform was rammed through the Legislature--after being hammered out on a napkin at Frank Fat’s restaurant near the Capitol by lobbyists for the insurance industry, trial lawyers, doctors and business. Part of the compromise was an agreement among the interests that, for the next five years, they would not push an initiative or legislation to limit lawyers’ fees, change the liability laws or regulate insurance rates. But there is an old political axiom: “Always leave 2% for double-cross.”

Soon after the closed-door deal became public, consumer groups, still frustrated by the continuing deadlock over insurance reform and angered over being shut out of the negotiating process, moved to qualify initiatives that threatened both insurers and attorneys by regulating insurance rates and cutting damage awards. Reacting to consumer activists’ moves and nervous about being left unprotected in the initiative process, the insurers and lawyers broke their fragile truce and launched their own initiatives.

It had begun as posturing. The Legislature postured, knowing that as long as the question of insurance reform was unresolved, the potential for contributions from groups with a stake in the outcome remained high. Insurers and trial lawyers postured, using the threat of an initiative to prod legislators into dealing with the issues and to force opponents into backing an acceptable legislative compromise.

But a childish game of “chicken” became a brutal round of “King of the Hill,” reflecting the take-no-prisoners mentality that permeates politics from the presidential level on down. And it has fueled the most expensive political campaign in California’s political history. Some estimates of total spending on insurance-initiative campaigns range above $60 million.

Abandoning its own initiative attempt--public support for attorneys being far from overwhelming--the California Trial Lawyers Assn. has backed Proposition 100, launched by the Insurance Consumer Action Network. The ICAN initiative, also supported by Van de Kamp and the state’s banking industry, would regulate insurance rates, allow banks to sell insurance and forbid redlining (the refusal to sell insurance in certain neighborhoods), but would place no limits on attorneys’ fees.

A dissident company, Coastal Insurance, may spend $8 million to pass Propositon 101. Sponsored by Assemblyman Richard Polanco (D-Los Angeles), it would cut a little hide out of both insurers and lawyers by paring some rates and limiting pain-and-suffering awards and attorneys’ fees, but would expire in 1993.

The auto-insurance industry has placed its muscle and money behind its no-fault initiative, Proposition 104, and Proposition 106, which would limit attorneys’ fees in auto accident and other tort injury cases; it has budgeted an estimated $43 million to fund its campaign--more money than has been spent on any other campaign in American political history, other than for President.

Facing recent polls that indicate the possible loss of industry-backed initiatives, the insurers appear to be directing much of their fire away from the passage of Propsitions 104 and 106 and toward the defeat of Propositions 100 and 103; the latter proposition was introduced by the consumer group Access to Justice, triggering the current initiative potlatch. Backed by consumer advocate Ralph Nader, Prop. 103, the “voter revolt” initiative, like Prop. 100, would cut rates, regulate insurance companies and repeal the insurance industry’s anti-trust exemptions; its requirement that the state’s insurance commissioner be elected is anathema to the insurance industry.

That, too, is take-no-prisoners politics--”If I can’t get what I want,” the drill goes, “I’ll stop you, too.”

There are elements in each of the five insurance initiatives which, if merged into legislation and fine-tuned to fit the needs of everyone with a stake in the policy outcome, might realize reform and control premium costs, as the medical malpractice package did. But that kind of melding is difficult to achieve in the initiative process. And it is hard to rectify mistakes, or adapt policy to changing needs, when lawmaking is done by initiatives that can only be amended by voter approval or a two-thirds legislative majority.

No one should think for a minute that “the people” will decide the issue of insurance reform by voting in this election. Should one or more of the insurance initiatives pass, the courts will no doubt be faced with untangling the legislative thicket created by questions of constitutionality and conflicting provisions--which shows that the courts really do make law but, these days, the Legislature doesn’t even try first. And a “no” vote on all five initiatives would only preserve the unacceptable status quo.

The sensible course is clear. On the issue of insurance reform, California voters should sue everyone for malpractice.