Insurance Initiative Ads Draw Complaints

Times Staff Writers

A rash of complaints about advertising claims surfaced Wednesday in the battle over five insurance initiatives on the Nov. 8 ballot.

Three consumer groups accused two leading Southland insurance companies, Mercury and the Automobile Club of Southern California, of peddling false or misleading information in ads and mailings on behalf of Proposition 104, the no-fault initiative.

Meanwhile, the national board of Mothers Against Drunk Driving demanded that a commercial citing the organization’s name in support of the trial lawyers-sponsored Proposition 100 be taken off the air. In a telegram to the 100 campaign, the board said the commercial “is strictly not permitted by MADD’s tax-exempt, educational status.”

Officials of Mercury and the auto club defended their efforts, and a spokesman for the 100 campaign said the commercial MADD objects to will not be taken off the air.


The insurance industry has announced plans to spend $43 million on its campaign for the no-fault initiative and Proposition 106, a measure to slash lawyers’ contingency fees. The trial lawyers are the primary contributors to what appears likely to be a $15-million campaign for Proposition 100, a measure calling for rate rollbacks for “good drivers” and future rate regulation. Much of both sides’ expenditures go for advertising and mailings.

Yet despite these expenditures, the heaviest in any campaign in state history, all three initiatives are trailing Proposition 103, a competing rate rollback measure supported by consumer advocate Ralph Nader, in several polls. The Nader campaign is expected to spend about $3 million.

In the exchanges over advertising Wednesday, the Consumers Union, California Common Cause and the Consumer Federation of California, all supporters of both Propositions 100 and 103, accused Mercury insurance of “blatant deception and distortion and an outright attempt to mislead the public” in a series of newspaper advertisements headlined, “Save 30% to 35% on auto liability insurance premiums . . . if Proposition 104 prevails.”

Judith Bell of the Consumers Union said that what the ad does not make clear is that insurance buyers would experience such savings only if they bought a stripped-down policy carrying a $2,000 deductible, affording only $5,000 in coverage and requiring that one collect damages from medical insurance and worker’s disability before going to the auto insurer.


She said the stripped-down policy would “not (be) worth a dime,” and that most Mercury policyholders staying with regular policies would get only one-fourth to one-third of the headlined savings.

Responding for Mercury, George Joseph, its chief executive, defended the advertisements, saying he is convinced from the experience of other no-fault states, such as Florida, that many Mercury policyholders would opt for the stripped-down coverage and find it satisfactory.

He pointed out that Mercury’s ad does refer to the savings as resulting from policyholders “exercising the cost savings option in Section 12011 of Proposition 104.”

Meanwhile, California Common Cause Executive Director Walter Zelman accused the Automobile Club of Southern California of making at least three false statements about the no-fault initiative in a recent mailing to 2.2 million Southland households.

Specifically, he took issue with auto club claims that Proposition 104 would “pay claims for no-fault benefits within 30 days or pay penalties,” would “protect seriously injured victims’ right to sue the at-fault party for pain and suffering damages” and would “require insurance companies to roll back premiums for personal injury coverage by 20% for two years.”

In fact, Zelman pointed out, under the no-fault measure, the insurers must both receive reasonable proof of loss and finish their investigations before the 30-day period begins. Also, victims must show their injuries are both serious and permanent in order to establish their right to sue. And the 20% rollback promised is a statewide average, not a guarantee that every policyholder will get 20% off.

Necessary Abbreviation

Responding for the auto club, Larry Baker, a vice president, said that while the club has “tried to be very scrupulous” in its mailings, the words Zelman object to constitute a necessary abbreviation and generalization. “It’s impossible to get every qualification into a two-page letter,” he asserted.


In the campaign over Proposition 100, a national vice president of Mothers Against Drunk Driving, Milo Kirk, expressed outrage that the pro-100 campaign had refused to cancel the commercial citing MADD in support of the initiative.

“They are trying to use our name for their benefit,” Kirk said. “We didn’t want MADD’s name in a commercial and they went right ahead and did it anyway. They will not take it off the air. The only thing we can do is to let the public know how MADD has been used. It’s deplorable.”

But Bob Schmidt, a spokesman for the 100 campaign, said that since the commercial was merely film of the MADD California chairperson endorsing the initiative at a news conference on the steps of the State Capitol, the campaign sees no reason to withdraw it.

Meanwhile, there were these other developments Wednesday:

- Gov. George Deukmejian’s press secretary, Kevin Brett, said Deukmejian intends to take a stand on all five insurance initiatives either late this week or early next.

- The governor’s insurance commissioner, Roxani Gillespie, summoned Harry O. Miller, chief executive of Coastal Insurance Co., to a hearing with Insurance Department officials in Los Angeles to explain his company’s attempt to escape rate rollbacks that may be approved by the voters by shifting his 250,000 policyholders to an out-of-state company that he says would not be subject to the rollbacks. A spokeswoman for Gillespie said later that no results of the hearing would be immediately disclosed. She said the commissioner wants to hear firsthand from Miller “what he’s up to.”