Wilson Backs No-Fault Auto Insurance Plan : Legislation: The two-tiered structure would eliminate legal wrangling on claims of less than $15,000.

Gov. Pete Wilson on Wednesday embraced a no-fault automobile insurance proposal he said would stabilize rates for all California drivers and provide a cheap, “no-frills” policy for motorists who might otherwise drive illegally without insurance.

Wilson’s announcement was the new governor’s first public statement on the politically volatile issue of auto insurance, which has been hotly debated since voters in 1988 approved Proposition 103 that promised, but has not delivered, rebates and lower premiums.

At the same time, voters turned down a no-fault measure championed by insurance companies as the answer to upward-spiraling premiums. The legislation embraced by Wilson differs substantially from that initiative.

It would replace California’s current liability insurance system with a two-tiered structure designed to settle small claims quickly without involvement of lawyers or courts.

Under no-fault, motorists collect from their own insurance company in the event of an accident, regardless of who is at fault. The Wilson-backed measure would apply to accidents in which medical bills and lost wages total less than $15,000 per person. More serious accidents would be settled under the traditional system in which claims are either negotiated or decided in court.

The insurance industry’s failed no-fault plan, by contrast, eliminated lawsuits in nearly all accidents. It also included unrelated changes in insurance regulation that were opposed by consumer groups.

Wilson’s endorsement of the legislation, which is backed by Consumers Union and a coalition of insurance companies, puts the Republican governor on a political collision course with Assembly Speaker Willie Brown (D-San Francisco), who has twice blocked similar versions of the bill.

Wilson’s pledge to work actively for the measure also served to contrast his style with that of his predecessor, former Gov. George Deukmejian, who avoided involving himself publicly in breaking a years-long legislative stalemate on the issue.

At a Capitol news conference, Wilson said a relentless rise in automobile insurance premiums is financially squeezing the middle class and forcing the poor to break the law by driving without coverage.

“Insurance rates are out of control,” he said. “This is an idea whose time has long since come.”

As he spoke, Wilson was surrounded by more than a dozen representatives of minorities and the poor who vowed to wage a fierce, grass-roots lobbying campaign aimed primarily at shattering Brown’s alliance with the state’s trial lawyers, who oppose the bill.

“We are going to mobilize our network to make Willie feel that the time is now for him to be on the side of poor people,” said Alex Esclamado, publisher of the Philippine News in San Francisco and a spokesman for the Filipino-American Political Assn.

The problem, according to Wilson and the bill’s other supporters, is that insurance costs are being driven up by excessive litigation from minor accidents and by court judgments compensating victims for their “pain and suffering.”

“People think they get in a car accident and they’ve won the lottery,” said state Sen. Frank Hill (R-Whittier), who is co-authoring the bill with Democratic Sen. Patrick Johnston of Stockton. Hill said more than half of every premium dollar in the current system goes to pay court costs and attorney fees.

Under the Johnston-Hill proposal, the current requirement that every motorist carry liability insurance would be dropped. Instead, all drivers would have to buy the minimum policy, which would start at $220 a year for good drivers. Motorists would have to submit proof of insurance when they registered their cars with the Department of Motor Vehicles.

Requiring settlement with insurance companies of accidents causing injuries and lost wages totaling less than $15,000 per injured person, would affect an estimated 90% of accident claims.

In these cases insurers would have to pay the policyholder’s claim within 30 days or face a 2% monthly penalty added to the cost of the claim.

For more serious accidents, including those involving pain and suffering, a victim could continue to seek reimbursement from the person at fault, either through the other driver’s insurance company or by going to court.

Damages for pain and suffering could only be collected in cases involving “serious or permanent” injuries--defined as anything from a fractured limb to dismemberment or death. This differs from the industry’s 1988 no-fault initiative, which limited pain-and-suffering awards to injuries that were both serious and permanent.

Supporters of the bill say low-income drivers would benefit because they would be able to buy a basic policy for $220 annually, compared to minimum liability coverage under current law that costs $1,000 or more.

The supporters also said that more affluent drivers--those now able to afford insurance--also could be expected to buy optional liability coverage to protect their assets, such as their homes, if they are held legally responsible for a serious accident. These motorists would not see their rates reduced, but could benefit from fewer lawsuits and a decrease in the number of people driving without insurance.

“For all Californians, we will see a slowdown in the rate of increase,” Johnston said.

The bill’s opponents said the measure would limit the right of accident victims to be fully compensated for their injuries.

“No-fault is simply another attempt by the insurance industry to gain total control of every claim by eliminating rights and benefits for injured victims,” said Ian Herzog, president of the California Trial Lawyers Assn.

Brown, in a statement released by his office, said he intends to work on an alternative proposal with a key state senator and the state’s first elected Insurance Commissioner, John Garamendi. Garamendi said he will work with Brown and Johnston.

AUTO INSURANCE PLAN HIGHLIGHTS

Here are highlights of the no-fault auto insurance plan endorsed by Gov. Pete Wilson.

* Repeals current requirement that drivers maintain liability insurance or proof of financial responsibility for accidents causing bodily injury of $15,000 per person and property damage of $5,000.

* Requires all motorists to purchase a basic “no-fault” insurance policy.

* For accidents causing less than $15,000 in medical bills, lost wages and other out-of-pocket expenses, drivers would collect from their own insurance company regardless of which motorist was at fault.

* Insurers would be required to pay on no-fault claims within 30 days.

* Prohibits insurers from raising premiums solely because a motorist files a claim.

* For more serious accidents, including those causing “pain and suffering,” victims would seek to collect from the driver who caused the accident or that driver’s insurance company.

* Doctors would be required to accept payment for medical bills according to a fee schedule now used in workers’ compensation cases.

* All drivers would have to submit proof of insurance when registering their cars with the Department of Motor Vehicles.