Supreme Court to Announce Decision on Prop. 103 Today

The state Supreme Court will rule today on the constitutionality of Proposition 103, the far-ranging insurance initiative approved by voters Nov. 8, the court announced Wednesday.

The decision will come in one of the most widely watched cases to come before the justices in years and will affect millions of Californians holding automobile and property insurance policies.

At stake are an estimated $4 billion in premium reductions mandated under the initiative--as well as broad new governmental control over the insurance industry in the state.

The measure, sponsored by consumer advocate Ralph Nader and a group called Voter Revolt, would reduce auto and property insurance rates 20% below their November, 1987, levels and hold them in place until November, 1989, unless an insurer can show a “substantial threat of insolvency.” After that, any rate increases would require state approval.

Other provisions would sharply limit auto policy cancellations and non-renewals, provide for an elected state insurance commissioner, subject the insurance industry to state antitrust laws, require auto premiums to be based primarily on driving records and allow banks to sell insurance.

The day after the election, insurers challenged the validity of the measure in several lawsuits filed with the high court. Among other things, industry lawyers contend the across-the-board rate reductions are arbitrary and confiscatory, threatening the ability of insurers to earn a fair return. Rate adjustment procedures are too cumbersome and time-consuming to provide effective relief, the industry said.

Supporters’ Viewpoint

The insurance companies said further that the measure would never have been approved without its sweeping rate slashes, and that if those provisions are declared invalid, the whole initiative should be thrown out.

Sponsors of the measure and the leading state official defending the initiative, Atty. Gen. John K. Van de Kamp, replied that the rate rollbacks are a legally valid response to huge and uncontrolled premium increases in the last five years.

Lifting antitrust exemptions will promote competition that will lead to lower prices, backers said, and the measure’s auto insurance reforms will reward safe drivers by basing rates mainly on driving records rather than where the policyholder lives. If any provision of the measure is found unconstitutional, others should be left intact to take effect independently, defenders said.

The justices allowed most of the initiative to take effect temporarily, but blocked the rate rollback and reduction from being implemented while the case was pending.

The court heard arguments in the case before a packed courtroom in Sacramento on March 7, with the justices exhaustively questioning attorneys on both sides.

Despite the complexity of the case, today’s decision will come well within the court’s new self-imposed rule requiring rulings to be issued within 90 days after argument.

The widely awaited decision is to be filed at 9:30 a.m., with copies of the ruling to be issued simultaneously at court offices in San Francisco, Los Angeles and Sacramento. Ordinarily, decisions are released only at the court’s headquarters here.