Insurance Back in Legislature’s Lap : Campaign Largess From Lobbyists Has Lawmakers in Quandary

During the last two election cycles, insurance companies and personal injury lawyers--two of the most economically powerful adversaries in California--poured at least $9.2 million into the political campaigns of lawmakers and spent themselves into gridlock.

Consequently, despite citizen demands to do something about rising insurance rates, especially on automobile policies, no substantial overhaul emerged from the Legislature, a situation that seemed to leave the public increasingly more impatient for change.

Opportunity came in the Nov. 8 elections and voters took it by passing Proposition 103, the landmark rate-cutting initiative that won out in a ballot fight that triggered its own political spending frenzy. Insurers and lawyers spent more than $75 million, unsuccessfully, on behalf of other insurance-related measures on the ballot.

Constitutionality at Issue

The constitutionality of Proposition 103, including its provision for 20% rate reductions, is before the state Supreme Court.

However, regardless how the court rules, the insurance issue seems certain to land back in the Legislature. Such questions as whether to adopt some form of no-fault insurance and whether to limit attorney fees in personal injury lawsuits are ones likely to return to the Capitol.

Opinion varies on the fate of such issues.

Even now, despite the voters’ verdict at the ballot box, some consumer advocates warn of the legislative paralysis persisting, despite declarations to the contrary by legislative leaders.

“All they’ve said is the same words they’ve used in the last two sessions, ‘We’re going to do something about auto insurance,’ ” said Harry Snyder, West Coast director of Consumers Union, publisher of Consumer Reports. “Well, we’re going to have to wait and see, but I am not hopeful.”

Edward Levy, general manager of the influential Assn. of California Insurance Companies, said he believes there is a “fair chance that the stalemate continues. But there’s probably an equal chance that the Legislature realizes it really has to do something to lower what is paid out by insurance companies.”

In the 1980s as insurance premiums rose, chiefly on auto policies, insurance interests and personal injury attorneys in Sacramento fought to a legislative deadlock with huge campaign contributions in order to protect their economic interests.

“Neither side may have the strength to get what they want, but both have the strength to prevent what they don’t want and they are comfortable with that,” said Walter Zelman, executive director of California Common Cause, an organization advocating campaign finance reform.

In retrospect, Sheldon Davidow, a former consultant to the Senate Insurance Committee and now an executive with an insurance organization, Doctors Management Co., said the two warring factions devoted so much attention to their struggle against each other that they overlooked the most important factor in the equation--the popular will and support of the consumers.

‘Abandoned Involvement’

“I think the real tendency in this industry and the trial Bar, too, is to just throw money at this issue and not deal with the people,” he said. “They have abandoned community involvement and put money forward just to get legislators’ attention.”

Steven Miller, of the nonpartisan Insurance Consumer Action Network which monitors campaign spending by both competing interests, said the heavy contributions from the opposing lawyers and insurers caused “a lobby lock where members (of the Legislature) were unable to pass legislation that they perceived was adverse to the interests of their benefactors.”

“I’m not suggesting there is a direct quid pro quo on these contributions. It’s not a question of a smoking gun; it’s a question of a smoke-filled environment. Members just know a vote a certain way might affect their fund-raising next time,” said Miller.

An examination by The Times of political donation records over the last four years showed that the contribution arms race between insurers and trial lawyers started in earnest during the 1986 elections and persisted through last November.

For example, life, property and casualty insurance organizations donated about $3.1 million to legislators in 1985 and 1986 while personal injury attorneys weighed in with $1.3 million. Each side gave heavily to legislative leaders of both parties and to individual members of committees that process insurance and personal injury legislation. The lawyers were more generous to Democrats than to Republicans.

During the 1988 elections, even as the combatants were gearing up to fight the astronomically expensive initiative campaigns, they contributed heavily to legislative candidates in primary races. They backed off substantially in the general election and concentrated on the initiatives.

Incomplete reports filed with the State Fair Political Practices Commission and Secretary of State March Fong Eu show that life, property and casualty companies pumped about $3.8 million into 1988 legislative campaigns. Led by the California Trial Lawyers Assn., personal injury attorneys contributed approximately $1.2 million.

These amounts over the last four years easily placed insurance companies and trial lawyers among the biggest givers to legislators, along with doctors, real estate interests and banks. For the 1988 primary, for example, the insurers’ political action committee contributed $946,000 and the California Trial Lawyers Assn. gave $873,000. By comparison, $828,000 was donated by the California Medical Assn., $464,000 by the California Real Estate Political Action Committee and $661,000 from banker organizations.

Contributions from both the attorneys and the insurers reflected the fact that no matter how the ballot propositions fared, the Legislature would remain an important entity with which they would have to deal.

‘Staggering Sum’

The aggregate total contributions of at least $9.2 million over four years by the two adversaries constitutes what consumer advocate Miller calls a “staggering sum . . . representing the growing influence of special interests generally in the legislative process.”

Gov. George Deukmejian, meantime, collected about $400,000 in political donations from many of the same insurers during the 1985-88 period. He received only $2,000 from the California Trial Lawyers Assn.

Miller noted that some members of the Legislature’s two insurance committees have come to “rely almost exclusively on (insurance) interests for their campaign contributions.”

“There is no question the contributions from both sides have created a ‘lobby lock’ that has impacted our ability to craft reform in any area,” Miller said.

And Miller added that he has seen no evidence that there will be “anything other than business as usual” even after a new political “reform” initiative, Proposition 73, takes effect in January.

Says Funds Pave the Way

Levy, of the Assn. of California Insurance Companies, said contributions merely pave the way to “be able to talk to people who are very busy . . . and demonstrate to them our support. At least it gets you a lot of hearings and we’ve gotten a lot of hearings in the past four years.”

The trial lawyers and the insurance interests each accuse the other of escalating the financial war and insist that each side has been forced to invest increasingly larger sums in legislative campaigns as a defensive measure to maintain their clout with the lawmakers.

“It (the figures) doesn’t surprise me because it was apparent to us the insurance industry was giving humongous amounts of money,” said Nancy S. Drabble, a lobbyist for the California Trial Lawyers Assn. “The battle is often depicted as being between equally powerful groups. The insurance industry is far bigger than the trial lawyers.”

It may be bigger, Levy acknowledged, but it is not nearly as cohesive as its rival, the trial lawyers.

“I don’t think there is such a beast as the insurance industry,” he said. “I mean there are a lot of insurance industries and a lot of insurance interests and they don’t go after the same things. So when people talk or write about the insurance industry and its size and its this and its that it really overstates the case.”

Party Leaders Benefit

The major recipients of campaign funds have been party leaders, who, in turn, have parceled out the contributions to candidates who are political allies. Typically, the personal injury attorneys and the casualty and life insurance groups have given to both parties.

Assembly Speaker Willie Brown (D-San Francisco) amassed $309,200 from the insurance groups for 1988 campaigns and $160,150 from the lawyers. Senate leader David A. Roberti (D-Los Angeles) received $103,400 from the insurers and $238,550 from attorneys.

On the Republican side, Assemblyman Pat Nolan of Glendale, who resigned last month as GOP floor leader, collected $151,400 from the insurance companies for this year’s elections, but only $1,000 from personal injury lawyers. Senate GOP leader Ken Maddy of Fresno reported $96,250 from insurance organizations and $14,500 from the lawyers. Explaining the dramatic difference between the donations of insurers and attorneys to the GOP, one trial lawyer lobbyist said that Republicans are more pro-business and less supportive of the rights of accident victims.

Contribution reports showed that Sen. John Doolittle (R-Rocklin), a member of both the Senate Insurance and Judiciary committees, was a favorite of both adversaries, apparently because he never aligns himself too closely with either. “He is a critical vote and doesn’t vote all the time one way or the other,” Roberti observed.

Records showed 1988 contributions of $102,050 from the insurers to Doolittle, who as GOP caucus chairman is the No. 2 Republican leader in the Senate, and at least $40,000 from trial lawyers. Sen. Alan Robbins (D-Van Nuys), chairman of the Senate Insurance Committee, collected $116,250 from insurance interests and $3,000 from trial lawyers.

Robbins announced during a March hearing in Los Angeles that he would not accept contributions from auto insurance companies or trial lawyers until both sides reached agreement on reforms. He said his idea was to encourage his colleagues to do the same thing and thus separate the issue of insurance reform from the influence of campaign money. But it didn’t work.

‘There Was No Bandwagon’

“At the time, it was intended to put pressure on insurers and trial lawyers to force them to agree to reduce the cost of auto insurance,” Robbins said. “To be honest, at the time I thought other politicians would take the same pledge. But there was no bandwagon.”

The role these campaign contributions played in affecting legislation and creating a legislative deadlock, consumer advocates say, can be easily demonstrated by the meager legislative accomplishments in the insurance arena during recent years.

“Certainly the net effect (of contributions) was to stymie insurance reform,” Miller contended. “Lobbyists through campaign contributions had a level of power which consumer groups simply could not match. While we may intellectually have had the more compelling arguments, they got diluted by the enormity of the insurance contributions that no doubt influenced the outcome of the process.”

While stalemated on the major issue of automobile insurance reform, especially in the rate-setting arena, the Legislature, in what was widely perceived as a back room deal, did enact a liability insurance “reform.” However, some consumer advocates charged it benefited major economic interests but not the average Californian.

Negotiated one night during the final hours of the 1987 session at a capital restaurant favored by legislators, lobbyists and Administration officials, the bill was drafted on a linen napkin and never went through the normal public hearing process. But it quickly passed the Legislature and was signed into law by Deukmejian.

Provisions Described

It protected tobacco and alcoholic beverage manufacturers from some liability suits, enabled doctors to keep protections against certain malpractice lawsuits, allowed trial lawyers to collect bigger fees from major damage awards and reduced the number of cases where an insurance company must hire independent lawyers for their clients.

For a while in 1987, an insurance measure authored by Assemblyman Lloyd Connelly (D-Sacramento), which had the strong backing of consumer groups, appeared to be gaining momentum in the Legislature. But it was suddenly derailed by a weaker insurer-supported bill offered by Senate Democratic Floor Leader Barry Keene of Benicia, who received $54,000 in campaign contributions from insurance interests during 1987 and 1988 even though he was not up for reelection.

Both the Connelly and Keene bills called for introduction of a “flex-rating” system providing for regulatory review when insurance company rate increases exceeded a certain percentage.

Connelly Measure Killed

When the Keene bill, requiring much higher rate increases before it triggered regulatory action, gained the support of Assembly Speaker Brown, who had been negotiating behind the scenes with insurance lobbyists, the Connelly measure was killed by the Assembly Ways and Means Committee. Keene’s legislation was approved by that committee, then died later in the Legislature--preserving the status quo of no regulatory review of rate hikes.

More recently, life insurance companies, among the more generous contributors at election time, accomplished one of their highest priorities: Requiring that an applicant submit to a test for AIDS as a condition of receiving a life insurance policy. It became law.

Life insurance companies and their political action committees contributed at least $1 million to legislative campaigns over the last four years.

INSURERS AND TRIAL LAWYERS CONTRIBUTIONS Insurers and lawyers who specialize in personal injury cases are among the largest contributors to legislators’ reelection campaigns. For the 1988 elections, $3.8 million was provided by the insurance industry and $1.2 million came from trial lawyers. The bulk of the money was contributed to legislative leaders and other lawmakers who hold positions on key committees that determine the fate of bills lobbied by those interests. Here are some of the major recipients:

RECIPIENT INSURERS LAWYERS TOTAL SENATE Pres. Pro Tem David Roberti (D-L.A.) $103,400 $238,550 $341,950 Minority Leader Ken Maddy (R-Fresno) 96,250 14,500 110,750 Insurance Committee (9 members) $562,848 $98,546 $661,394 Judiciary Committee (11 members) $468,088 $404,725 $872,813 ASSEMBLY Speaker Willie Brown (D-San Fran.) $309,200 $160,150 $469,350 GOP Leader Pat Nolan (R-Glendale) 151,400 1,000 152,400 Finance and Insurance Committee (21 members) $695,269 $77,950 $772,319 Judiciary Committee (10 members) $231,541 $154,525 $386,066

TOP CONTRIBUTORS California Trial Lawyers Assn.: $1,023,418 Insurer’s Political Action Committee: $946,000 Insurance Men’s Political Action Committee: $430,727 Mercury Casualty Co.: $227,950 Industrial Indemnity Co.: $202,835 20th Century Industries: $145,945 California Life Underwriters Political Action Committee: $148,020 Farmers Insurance Co.: $115,950