Prop. 103 Consumer Group Costs to Be Paid : Insurance: Implementation hearings get under way with attendance weighted heavily in favor of the industry.


Proposition 103 implementation hearings that are expected to last at least two months got under way here Monday with a decision that consumer representatives will be compensated for their participation.

The chief hearing officer for the state Department of Insurance, retired Santa Clara County Superior Court Judge William J. Fernandez, said that any consumer group that makes a substantial contribution to the proceedings could submit its legal fees and expenses each 30 days and will be reimbursed if deemed reasonable.

Fernandez added that witnesses used by consumer groups to testify on the issues at the hearings will also have their expenses paid after their appearances.

He said the Insurance Department will advance the necessary funds. But eventually the department will pass the costs on to insurance companies that do business in California, Fernandez said. According to the law, the companies pay the Insurance Department's budget.

Insurance Commissioner Roxani Gillespie said she had been consulted in the hearing officer's decision and that she fully approved of the payments as a means of assuring that consumer groups at the drawn-out and complicated hearings will be represented to the same degree as the insurance companies.

Harry Snyder, West Coast director of the Consumers Union, called the compensation order "a very auspicious beginning to the hearings. It will guarantee fairness," he said. "Now it's up to us to adequately represent the consumers, to be sure they are given what they voted for when they passed Proposition 103."

As the hearings began on such key Proposition 103 implementation issues as rate rollbacks, what constitutes a fair return for the companies and new methods of pricing auto insurance on other than a neighborhood basis, industry representatives vastly outnumbered consumer delegates in the hearing. The ratio appeared to be about 10 to 1.

But representatives of such groups as the Consumers Union, Voter Revolt, Public Advocates Inc. and the Latino Issues Forum managed to speak almost as often as all the company lawyers combined. Robert Gnaiza of Public Advocates estimated that the industry lawyers in the room were billing their companies a combined total of $500,000 a day in fees, which are passed on to policy holders. He said the consumer representative billings will be only a fraction of that.

Paul Alexander, speaking for State Farm Insurance Co., replied that the $500,000 figure for the industry attorneys was an exaggeration. But he made no estimate of his own.

Much of the first day of the hearings was taken up by pleas by industry lawyers for special treatment for their clients.

Several lawyers insisted that the companies they represented should be exempted from the regulations developed by these hearings altogether and be treated individually later. But the hearing officer said this would not be done and that all companies doing business in California are subject to the hearings.

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