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Panel Approves Insurer-Backed No-Fault Bill

Times Staff Writer

Siding with the automobile insurance industry and against sponsors of Proposition 103, the Assembly Finance and Insurance Committee Tuesday approved an industry-backed no-fault automobile insurance bill.

The measure, introduced by Assemblyman Patrick Johnston (D-Stockton), was sent to the Ways and Means Committee on a bipartisan 11-5 vote. The 11 votes in favor represented the bare majority necessary to move the bill forward.

The committee’s approval of the bill introduced a new element of confusion into the state’s already chaotic auto-insurance situation. While there is nothing in Johnston’s bill that directly conflicts with Proposition 103, the legislation would set up a new system of auto insurance that would be largely beyond the reach of many of the provisions of the insurance-reform initiative approved by voters last November.

Harvey Rosenfield, Proposition 103’s main author, said the Johnston bill would undermine most of the initiative. Implementation of most of Proposition 103’s provisions has been delayed pending a decision by the state Supreme Court, expected by June, on challenges to the measure’s constitutionality.

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Tuesday’s vote marked the first time in more than a decade that a no-fault insurance bill has been approved by the Finance and Insurance Committee. Earlier legislative no-fault proposals were unable to overcome the intense political tug-of-war between the insurance industry and trial lawyers.

The committee vote was a clear victory, for the time being, for the insurance industry, which last November watched its own version of no-fault, Proposition 104, go down to defeat.

The Johnston bill would create a no-fault auto insurance system in California similar to one used in New York state that guarantees timely payments to accident victims regardless of who is at fault in an accident.

Supporters say it would increase benefits to accident victims and “stabilize” auto insurance rates, principally by severely limiting accident victims’ right to sue. Under the bill, victims would be unable to to sue for “pain and suffering,” or non-economic losses suffered in accidents, unless they could show “serious” injury or monetary losses of more than $50,000.

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Opponents argued Tuesday that the measure would also nullify most of the consumer-protection provisions of Proposition 103, designed to bring about a 20% rollback in insurance rates and impose tougher state regulations on the insurance industry.

Rosenfield told the legislators before they voted that even insurance industry officials concede that the Johnston bill would lead to premium increases.

“The voters rejected no-fault on the ballot,” Rosenfield noted.

After the vote, Rosenfield charged that committee members succumbed to intense lobbying pressure exerted by the insurance industry.

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“The insurance industry always gets its way in Sacramento. The astounding thing about it is that the folks up here just never got the message (from voter approval of 103 and rejection of 104),” Rosenfield said after the vote.

Johnston, the committee chairman, argued that his bill “compliments” rather than competes with Proposition 103. He pointed out that that the measure is supported by Consumers Union, a pro-consumer group that opposed Proposition 104, supported Proposition 103 and has long backed strong regulation of the insurance industry.

The Democratic lawmaker said the new measure differs from Proposition 104 in that his bill would provide higher benefits to accident victims, would give them a greater opportunity to sue in the event of serious injuries and would not relax industry regulation, as the insurers’ initiative wanted to do.

Judith Bell, special projects director for Consumers Union, agreed, saying the Johnston bill is “significantly different” from Proposition 104.

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During the hearing, James P. Corcoran, the New York state superintendent of insurance, said that bodily injury claims in his state stemming from accidents have dropped from about 146,500 in 1973 to roughly 35,200 in 1984, a decrease of about 80% that he attributes to New York’s 1977 no-fault law.

Corcoran said that while auto insurance rates did go up, the rate increases have been averaging under 5% annually.

Johnston faces strong opposition within his own party to his bill. The five “no” votes cast Tuesday were all from Democrats, and the bill was attacked by Assembly Speaker Willie Brown (D-San Francisco). Brown, allied politically with the trial lawyers, called the no-fault measure “a fraud without a mandated reduction in rates.” Brown argued that since Proposition 104, the no-fault initiative, was so resoundingly defeated, it is “ludicrous” for members of the Legislature to “embrace” the concept in a bill.

In other action, the Finance and Insurance Committee defeated a comprehensive health care bill carried by the Speaker but agreed to reconsider the action at a later time, technically keeping the measure alive. Brown’s bill, strongly opposed by business groups, would require employers with more than five employees to provide health-care coverage to each full-time worker.

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Bill Rejected

The committee also rejected a bill by Assemblyman Burt Margolin (D-Los Angeles) that would have provided health insurance to 5.2 million California residents who have no coverage at an annual cost to the state of between $4.2 billion and $5.2 billion.

While defeating those two bills, the committee did approve a bill by Assemblyman Phillip Isenberg (D-Sacramento) aimed at creating a catastrophic health insurance program for hard-to-insure individuals suffering from diseases such as diabetes and AIDS. Earlier versions of the bill have been vetoed by Gov. George Deukmejian.

In the Senate, meanwhile, a bill that would prohibit insurance companies from making campaign donations to candidates for state insurance commissioner survived its first test Tuesday with help from a veteran lobbyist representing an insurance group.

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The measure by Sen. Gary K. Hart (D-Santa Barbara) cleared the Senate Governmental Organization Committee on a 7-3 vote after Hart made a last-minute change to allow insurance brokers, agents and attorneys with insurance-related business to make donations of up to $250.


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