Only Lawyers Winning So Far on Prop. 103 : Insurance: Voter-approved reform has drifted into a legal morass, and resolution of the many conflicting actions could take years. In the meantime, companies are maintaining normal business activities.

In a dreary courtroom in the hills overlooking San Francisco International Airport, a group of about 40 lawyers are collecting fees totaling more than $50,000 a day for work that may ultimately come to naught.

Since Oct. 30, the lawyers have been meeting three days a week in hearings under the auspices of the state Insurance Department that mark yet another phase in the tortuous life of California’s landmark auto insurance initiative. The attorneys, nearly all of whom are paid by insurance companies, expect to continue their sessions until March.

As drivers anxiously await a resolution to what many view as an auto insurance nightmare, efforts to implement Proposition 103 have fallen ever further into a legal morass.

For example, the seemingly interminable discussions taking place here, focusing for the moment on what constitutes an insurance company’s “fair rate of return,” may have little or nothing to do with what finally happens to auto insurance in the state. Insurance Commissioner Roxani Gillespie largely ignored the lawyers last week in setting an auto insurance rate ceiling that had never even been discussed in the San Bruno courtroom.

As expected, the insurers have promised to appeal the move. Then again, such an appeal would not be necessary if a little-known Sacramento agency, the Office of Administrative Law, strikes down Gillespie’s regulations in a ruling it is expected to deliver today.

But, alas, that action, too, would be subject to legal appeal--this time by Gillespie’s lawyers to the governor’s office.

How it will all eventually work out for the state’s car insurance buyers and how soon implementation of Proposition 103 can proceed are unknown.

Each legal proceeding can be appealed to a higher, or different, tribunal. The process could take years, and some insurance company representatives suggest privately that at some point those pushing for change may simply lose interest and drift off to other issues, leaving the companies triumphant in their resistance.

Meanwhile, the legal wrangling continues on several fronts:

- In Los Angeles on Monday, Los Angeles Superior Court Judge Miriam Vogel will hear various insurers’ challenge of the current six-month freeze Gillespie has imposed on auto insurance rate increases, and the rate ceiling she wants to apply when the freeze ends. At the same time Gillespie will ask Vogel to uphold her actions.

Vogel also is considering a complaint by Gillespie that the insurers are engaged in an illegal conspiracy to block Proposition 103 by legal harassment, and the judge also must rule on a move by the Farmers group of companies to impose a 5.9% price increase despite the current rate freeze.

All sides are asking Vogel to issue orders supporting their positions.

- In Sacramento, Harvey Rosenfield’s Voter Revolt organization has gone before Superior Court Judge Richard Park to get all Proposition 103 cases “consolidated” in one court, preferably in Sacramento. Voter Revolt says it does not trust Judge Vogel’s views. Gillespie’s attorney, Karl Rubinstein, is opposing the motion.

- In San Francisco, the state Supreme Court is in the process of deciding a lawsuit brought by the Travelers company seeking to overturn Proposition 103 and Gillespie’s restrictions on a company’s right to quit doing business in California. Travelers wants to get out of the auto insurance business in the state, and if it wins high court assent for doing so, other companies can be expected to follow.

- Also in San Francisco, Superior Court Judge John Dearman has issued a broad order directing Gillespie to start prosecuting insurance companies for violations brought to her attention through consumer complaints. Dearman found in favor of a lawsuit brought by Ray Bourhis, one of several Democratic candidates to replace Gillespie next year, that said Gillespie had ignored more than 30,000 consumer complaints. Gillespie is appealing the action.

At this point, the clear beneficiaries from all this are insurance company lawyers and the companies themselves, which have managed to maintain normal business practices for more than a year despite all the mandated changes of Proposition 103.

The insurers are paying not only the fees of their own lawyers, but also are being assessed by Gillespie for the cost of consumers’ lawyers and the cost of the hearings, as well as the fees of the Insurance Department’s special private counsel. But the companies pledge to pass along to customers whatever the insurers finally have to pay in fees.

Meanwhile, the lawyers are earning healthy compensation from the insurance fight. There is no estimate on the total legal fees assessed since Proposition 103 was approved by the voters on Nov. 8, 1988, but everyone involved agrees that it runs into many millions of dollars.

“We should call it ‘the Proposition 103 assessment’ on our bills (to our customers),” suggested one company lawyer here this week. He asked not to be identified.

At the same time, attorneys such as Paul Alexander, representing State Farm, and David Balabanian, representing Fireman’s Fund, said that compared to the $23 billion in annual premiums the property and casualty insurance companies have at stake in California, the legal fees are not particularly high.

Both the San Bruno hearings and many of the other legal proceedings have been submerged in a wave of legal briefs filed by both company and consumer lawyers, but particularly lawyers for the companies. There are 700 companies doing business in California, but only six consumer groups actively pursuing the matter.

Even issues supposedly already decided--such as fees for consumer-group lawyers at the San Bruno hearings--have been reopened repeatedly by new briefs filed by various insurance companies who claimed they were not party to the decision, or that it was unclear.

“Almost no week goes by in which some insurance company does not either sue the commissioner or file a motion in a pending suit seeking to delay or hinder the commissioner in her implementation efforts,” said Rubinstein in his complaint last week asking Judge Vogel to issue an injunction barring companies from conspiring in such tactics.

Rubinstein’s complaint brought an angry rejoiner from George Tye, spokesman for the Assn. of California Insurance Companies. “He’s trying to say our lawyers can’t present our points of view,” Tye said. “That would be a violation of the Constitution.”

But, lawyers representing the companies at the San Bruno hearings say that their efforts are useful, even if Gillespie does not accept any of the lawyers’ conclusions. When the hearings are over, the lawyers argue, at least there will be a legal record of the hearing’s proceedings that they can try to use in later court appeals.