Garamendi Criticizes No-Fault Plan

Insurance Commissioner John Garamendi came out Thursday in opposition to Gov. Pete Wilson’s proposed no-fault auto insurance initiative, calling it only a partial answer to the problem of lowering consumers’ insurance costs.

He said he prefers a more comprehensive legislative solution but declined at a Los Angeles news conference to go into more than generalities on what a legislative solution should contain.

It was his first substantive comment on the proposed Wilson initiative.

The commissioner said he will not write his own bill on the subject because he does not think this would promote action. Instead, he said, he would try to mediate between backers of other proposals and give technical information to all parties.

He added that he sees some good elements in a measure introduced last week by state Sen. Art Torres (D-Los Angeles) that would limit attorneys’ fees and pain and suffering damages in auto accidents, but would not set up a no-fault system.

At the news conference, Garamendi said that even state Sen. Patrick Johnston (D-Stockton), who wrote most of the bill that Wilson has said he would adopt, opposes the use of his measure for the initiative.

But Johnston, contacted in Sacramento, said this wasn’t so. The senator said that he too prefers a legislative solution to an initiative but that he does not rule out joining Wilson in pushing his bill as an initiative. He said he will meet with Wilson to discuss the matter soon.

Johnston also urged Garamendi to propose his own solutions.

“It would be helpful if the commissioner would do more than exhort the Legislature to action and instead give some specific recommendations of his own,” the senator said. “If John has some ideas, he ought to share them.”

A leading foe of no-fault, Proposition 103 author Harvey Rosenfield, also urged Garamendi to make his specific views known.

“He’s got only one direction he can go, and that is to take a stand, come up with his own agenda and force it forward,” Rosenfield said in an interview. “Otherwise, he will be left in the dust while competing elected officials force their own agenda.”

Meanwhile, Dan Schnur, a Wilson aide on the auto insurance matter, said the governor would prefer a legislative solution to high auto insurance prices instead of having to campaign for a ballot initiative.

But, he reiterated, Wilson sees little chance that the Legislature will be able to act meaningfully on the problem. He noted that the Johnston bill the governor favors failed to clear a Senate committee last month when the committee deadlocked on it-- 5 for, 5 against and 1 abstention.

Wilson and Johnston put most of their emphasis for reform on reducing legal costs. Garamendi has said any solution must also reduce car repair, medical and other costs as well as legal expenses.

In another development Thursday, Garamendi announced several steps to assure that unlicensed out-of-state auto insurers have the ability to pay claims on policies they sell to California drivers, and he announced some revisions to standards for implementation of Proposition 103.

The commissioner said that under new emergency regulations, the so-called “non-admitted” or “offshore” auto insurers must, to do business in the state:

* Provide documents to the state showing they possess at least $5.4 million in capital and surplus.

* Demonstrate they have been in business at least three years.

* Establish a trust account in the United States if their home base is abroad, to ensure that there are funds in this country to meet obligations to policyholders.

Among the revisions of standards for Proposition 103 implementation announced by Garamendi was one allowing companies that use agents to sell their policies to have a higher expense allowance than companies that do not use agents in submitting requests for rate hikes.