Insurance Firms Accused of Ignoring ‘All-Comers’ Rule on Selling Policies

State Insurance Commissioner Roxani Gillespie and Atty. Gen. John K. Van de Kamp took separate legal actions Friday against insurance companies they contend are violating provisions of Proposition 103 that require them to sell policies to all drivers with no more than one traffic violation in the last three years.

This “all-comers” provision of Proposition 103 has become the focus of accusations, repeated Friday by insurance agents and others at a legislative hearing in Los Angeles, that virtually all companies doing business in California are ignoring it and continuing to refuse to sell to many racial minorities, young people and previously uninsured drivers. Seven companies were mentioned in the charges Friday.

The provision actually applies only to the 70% to 80% of the state’s drivers who qualify for a Proposition 103 “good driver discount” by not having more than one traffic violation or at-fault accident.

Officials of three major companies--State Farm, Farmers and Allstate--insisted at the hearing that two vaguely worded passages in a January “peace treaty” the industry made with Gillespie to put off enforcement of some features of Proposition 103 have given them the right to ignore the “all-comers” provision as well.

They acknowledged that their companies were refusing to sell their lowest-priced policies of the state-required minimum liability insurance to many drivers they would regard as “high risks,” despite these drivers’ good records. Instead, they said, in some cases they are bumping these customers over to higher-priced subsidiaries at rates up to 40% higher. But they said this is legally justified.

Despite these pleas, however, a Gillespie deputy who appeared at the hearing chaired by Assemblyman Patrick Johnston (D-Stockton), said the insurance commissioner does not agree that the January “peace treaty” exempted the companies from having to apply the “all-comers” provision.

Earlier in the day, Gillespie announced that she has issued notices of non-compliance to the Allstate, Chicago Insurance, Industrial Indemnity, California Casualty, Cal-American and Clarendon National companies giving them 10 days to begin adhering to the provision or face a public hearing. An aide later said similar notices will soon be sent to State Farm and Farmers.

The hearing procedure has been time-consuming in the past. Indications are that it may take Gillespie months to formally order the companies to observe the “all-comers” provision. Even then, her order would be subject to the usual legal appeals.

Meanwhile, Van de Kamp announced that he is suing the Farmers group of companies on much the same grounds as Gillespie. His lawsuit, however, may take less time to get results because it is possible the attorney general can get a temporary court injunction ordering Farmers to adhere to the provision.

Also during the Johnston hearing, the Personal Insurance Federation of California announced that it and three major companies, State Farm, Farmers and Safeco, will soon propose that the Legislature authorize them to sell a $180-a-year “basic compensation benefits” auto insurance policy throughout the state.

Dan C. Dunmoyer, vice president of the group, said the policy would be designed to satisfy the state’s minimum requirement for auto insurance and make it affordable.

The policy would give buyers up to $15,000 individual or $60,000 group coverage from their own insurers in the case of auto accidents, and they would not be required to carry any liability insurance as they are now. However, the policy would leave such buyers exposed to being sued by others.

The policy’s annual $180 cost would be guaranteed until Oct. 1, 1991, but would then be allowed to rise if the companies selling it were losing money on it.

Johnston, who is chairman of the Assembly Insurance Committee, dismissed the announcement as having little immediate significance. He said that Friday marked the last day that new legislation could be introduced in Sacramento during this year’s legislative session.

However, Dunmoyer pointed out that there is still plenty of time to amend the proposal into bills already pending.