Legislator, Consumers Union Plan Joint No-Fault Car Insurance Drive

The chairman of the Assembly Finance and Insurance Committee and leaders of the Consumers Union announced Friday that they will jointly push early next year for adoption by the Legislature of a no-fault auto insurance system modeled on the one in force in New York state.

Announcing that he will introduce a no-fault bill with “generous” benefits later this month, Assemblyman Patrick Johnston (D-Stockton) declared:

“Although Proposition 103 affirms the public’s demand for controlling insurance rates, it does not address the need to reduce claims costs, which are especially high in California.

“New York’s system offers a reasonable way to pay victims quickly, cut lawsuits for minor accidents, preserve the right to recover damages for pain and suffering caused by serious injuries and stabilize insurance premiums for the future.”

Consumer Protections

Harry Snyder, West Coast director of the Consumers Union, publisher of Consumer Reports magazine, said the no-fault plan to be proposed will contain many consumer protections that were missing in Proposition 104, a no-fault plan offered by the insurance industry in the recent election. Under no-fault, accident victims are compensated by their own insurance companies, regardless of who is at fault in the accident.

Proposition 104 was overwhelmingly defeated, getting only about 25% of the vote. But Judith Bell, an associate of Snyder, said Friday that the Consumers Union believes it was defeated in part because of who was sponsoring it and in part because the measure contained many other provisions advantageous to the insurers that had nothing to do with no-fault.

The Consumers Union supported Proposition 103 in the election, and Bell expressed confidence Friday that despite the state Supreme Court’s stay of the measure while it reviews its constitutionality, ultimately much of it will be allowed to go into effect.

“But we believe no-fault would complement Proposition 103,” Bell said.

Unlike consumers organizations that have been aligned with the California Trial Lawyers Assn. against no-fault, the Consumers Union has long supported the concept, although the no-fault benefits it supports are higher than those that have been acceptable to the insurance industry.

Five Initiatives

Johnston purchased advertising during the fall campaign calling for a ‘no’ vote on all five insurance initiatives on the ballot, including Proposition 103. He contended that all of the initiatives were one-sided, devoted to one special interest or another.

Friday, he declared: “As a non-lawyer, I would expect that portions of 103 will be held constitutional. Whether they are or not, the Legislature must and will assure the public that there is rate regulation, that the insurance companies no longer will enjoy the anti-trust immunity and that there will be a rate reduction, although not necessarily one of the magnitude called for in 103.”

Johnston said he will push his legislation to an early hearing, probably in January.

“The people have expectations the Legislature is going to do the job,” he said. “I want to start early, not wait until the court acts (on Proposition 103). There will always be a reason to delay.”

First reaction to the Johnston-Consumers Union proposal from both the powerful insurer and trial lawyer lobbies, representing the two professions that derive the most income from the auto insurance system, was cool but not entirely negative.

Harvey Levine, who will be installed today as the new president of the California Trial Lawyers Assn., declared:

“Less than a month ago, the people of California made clear how they felt about no-fault auto insurance by dealing an overwhelming defeat to Proposition 104. . . . It would, however, be premature of us to pass judgment on (the) proposal because we’ve not yet seen it or had a chance to review it.”

Stanley Zax, president of the Assn. of California Insurance Companies, the chief lobbying arm of the industry in the state, took critical note of references Friday to “generous” no-fault benefits, questioning how they would be paid for, but he also said:

“We’d be happy to study any rational proposal that any responsible figure would make to alleviate the problems here in California. We certainly regard Pat Johnston as responsible. We respect him and will be happy to work with him.”