Insurers Get a Break on Prop. 103 Bill in Assembly

In a move showing that automobile insurance companies still wield considerable clout in the Legislature, the Assembly on Monday rejected a Senate-passed bill to impose stiff fines on companies that try to escape provisions of Proposition 103 by mass cancellations of California policyholders.

The essentially partisan vote was 49 to 21--but 54 votes were required for passage because of an urgency clause that would have made the measure effective immediately.

The vote marked the second Assembly defeat for the measure, which was drafted by Sen. Alan Robbins (D-Tarzana) because of fears that insurance companies would make blanket cancellations of auto policies rather than live with the rate-reduction requirements of Proposition 103.

The initiative, approved by voters last November, requires insurers to reduce rates by 20% from the levels they were charging for the same coverage in November, 1987, unless the state insurance commissioner specifically grants them an exemption for economic reasons.

Supporters of the measure had hoped for a different outcome Monday because of the ruling last Thursday by the California Supreme Court upholding the constitutionality of the major provisions of Proposition 103.

Fear of Exodus

After the court handed down its decision last week, an Assembly vote on the Robbins bill was scheduled for Monday. Robbins and his allies clearly hoped the court ruling would help them pick up the handful of votes they needed to secure the bill’s passage. They also wanted to act quickly because of fears that the ruling could spur insurance companies to leave California.

“Following the court decision, time is of the essence,” said Assemblyman Patrick Johnston (D-Stockton), chairman of the Assembly Finance and Insurance Committee who carried the bill in the lower house for Robbins.

But Republicans, who were responsible for defeating the measure when it was brought up for its initial Assembly vote in April, voted in mass against the bill for a second time, casting virtually all the “no” votes.

GOP lawmakers, who traditionally receive a substantial amount of political support from insurance companies, made it clear during the Assembly floor debate that they disagreed with both the voters who passed Proposition 103 as well as the Supreme Court.

Assemblyman William P. Baker (R-Danville) denounced Proposition 103 as an attempt by voters to get “a free lunch” by voting to arbitrarily reduce their insurance rates.

Baker, in urging his colleagues to vote against the Robbins bill, said Proposition 103 was “wrong economically the day it went on the ballot. It is wrong today. The time to stand up for it is now. Vote no.”

Assemblyman Gil Ferguson (R-Newport Beach) said “supreme courts in America have been wrong just as often as they’ve been right and this Supreme Court is wrong.”

Immediately after the vote, Harvey Rosenfield, chairman of Voter Revolt, the organization that sponsored Proposition 103, denounced opponents of the Robbins bill.

Calling the bill “a very moderate proposal to give consumers a little bit of protection,” Rosenfield said opponents of the measure displayed “arrogance” and “insensitivity” to voters.

Rosenfield said the lawmakers acted like they were “conducting business on another planet.”

“They are just not in step with what the public wants--or even worse, they don’t care,” Rosenfield said. “What are we paying these people for if they are not going to do the job? They ignore the will of the people. I say, throw the bums out.”

Under the bill, insurance companies would be allowed to cancel or refuse to renew auto insurance policies only if they could prove fraud on the part of policyholders, or show that there had been non-payment of premiums or a substantial change in the risk of insuring a particular individual.

Under provisions of Proposition 103, companies that arbitrarily cancel policies or refuse to write new ones can be fined up to $250,000. By contrast, the Robbins bill would provide for fines equal to 50% of the insurer’s prior year private passenger auto insurance premiums multiplied by the percentage of non-renewed policies. That potentially could mean millions of dollars in fines for the state’s largest insurers.

Like ‘Traffic Fine’

Democrat Johnston said the current penalty is the equivalent of “a traffic fine” for wealthy insurance companies and a much stronger “deterrent” was needed to protect consumers.

After the vote, Robbins said he still hopes ultimately to be able to round up the 54 votes he will need in ensure passage of the measure in the Assembly. He noted that three lawmakers who had voted in favor of the measure in April were out of town and not able to get back to Sacramento in time for the vote and that a fourth was excused Monday because of illness.

However, Johnston said he thought the Robbins bill, if not dead, “is in a coma.”

In another development, state Controller Gray Davis sharply criticized state Insurance Commissioner Roxani Gillespie for being “totally unprepared” to implement Proposition 103 and the 20% rate rollback required by the initiative.

Davis said consumers might be forced to wait months, even years, because Gillespie’s agency “does not have the personnel, the expertise, or the regulations in place to implement Proposition 103.”

“As a result, in the near term consumers are not likely to see the 20% reduction in rates as promised by Proposition 103 and in fact many may actually experience premium increases,” Davis told reporters at a press conference.

Davis urged Gillespie to require insurance companies to make immediate rebates and not wait to go through the formal process of applying for exemptions. The Democratic officeholder also announced that he was going to begin an “insurance watch” to monitor the state Department of Insurance.

Gillespie and the staff of the Department of Insurance, in an equally barbed reply, noted that Davis had been considering running for governor. “From our perspective, the controller’s ‘insurance watch’ may have more to do with his ‘candidate’s watch’ on the governor’s seat,” Gillespie’s response said.

Gillespie insisted that “we have been preparing for months to implement whatever the Supreme Court handed us on Proposition 103.”

“In addition, we are unaware of any insurance expertise on the part of either the controller or his staff,” the response said, adding that Davis’ reasoning was “lame, at best.”