Bill on Low-Cost Auto Coverage Sent to Wilson : Insurance: Plan includes payment limits for doctors and lawyers. Health measure for small firms also passes.

Attempting to crack decades of political paralysis over reform of the costly automobile insurance system in California, the Legislature Monday night passed and sent to Gov. Pete Wilson a sweeping overhaul bill despite the opposition of powerful special interests.

With the marathon legislative session only hours away from a scheduled midnight adjournment, the lawmakers also voted final passage to a bill that for the first time would require insurance companies to offer health policies to small business employers.

However, last-gasp efforts to reform a third form of insurance, the problem-plagued $12 billion workers’ compensation program, appeared headed for defeat on Wilson’s desk.

A spokesman for Wilson, who had joined employers in making workers’ compensation reform a top priority, said that the Republican chief executive intends to make any failure to enact “real” reform a high-profile campaign issue against Democrats in the fall elections.

As shouting protesters kept up their summer-long demonstrations against state budget cuts outside the Capitol, lawmakers raced through stacks of bills.

Hurrying to catch up with major issues they had ignored for months, they passed a massive civil rights bill by Assembly Speaker Brown (D-San Francisco) and approved for the June, 1994, ballot a proposal to reduce from two-thirds to a majority the votes necessary to pass local school bonds and abandoned efforts to enact a forest protection program.

But insurance--for drivers, injured workers, small business employees struck by illness, and homeowners who suffer earthquake damage--dominated center stage throughout the day.

The comprehensive car insurance bill seeks to create a low-cost basic policy by curbing the forces that drive up the price of coverage. It cleared the Senate on a 24-7 bipartisan vote and went to Wilson on a 43-33 vote.

The overhaul of the auto insurance program was opposed by powerful interests with an economic stake in the system: personal injury lawyers, physicians, insurance companies and auto body repair shops.

Additionally, Consumers Union opposed it on grounds that it does not ensure substantial benefits for the public. In the Capitol, a bill that is opposed by virtually every special interest usually is considered good legislation.

Among other things, the bill by Sen. Bill Lockyer (D-Hayward) is aimed at creating a basic-coverage policy whose average annual cost would be about $288.

Limits would be imposed on the compensation of doctors who treat accident victims and on lawyers who would represent certain injured people in small claims courts instead of regular trial courts.

In an attempt to force drivers to buy insurance, motorists starting in 1994 would have to show proof of insurance before their vehicles could be registered. Current minimum levels of required coverage for bodily injury and property liability damage would be reduced and the bill would distinguish between serious and non-serious injuries for purposes of curbing litigation.

The bill also would require state Insurance Commissioner John Garamendi to try to establish an equalized rate procedure throughout California so that the premiums of drivers in high-cost Los Angeles, for example, would not be subsidized by motorists in low-cost rural localities.

“The target . . . is to produce a low-cost policy that most, if not all, Californians can afford,” said Lockyer, noting that political gridlock over auto insurance reform has won out since the 1960s.

Wilson’s insurance adviser, Marjorie M. Berte, said the governor does not have a position on the Lockyer bill. She noted that Wilson favors no-fault insurance and that the Lockyer bill does not offer that concept.

Berte said she was “very doubtful that the (Lockyer) bill saves any costs for consumers.” She said she fears that if the bill became law, trial lawyers “will use this in the future to forestall real reform.”

On the workers’ compensation front, a package of bills cleared the Assembly and all but one bill passed in the Senate. But even though the entire package passed, supporters and opponents predicted a veto by Wilson, who is believed to want stronger protections for employers.

Virtually everyone agrees that the current system of compensating workers for their injuries is riddled with inefficiency and meager payouts to beneficiaries, but employers, employees, doctors, insurance companies and attorneys fear that reform will come at their expense.

No matter how the bills fared, the workers comp issue is certain to remain alive in the fall elections for the Assembly and Senate.

A memo from an insurance industry lobbyist disclosed that it had “learned that Gov. Wilson has selected workers’ comp reform as one of a handful of key issues he will take statewide.”

The memo was dated last Friday, at the same time the governor was saying he hoped for an accord with the Democratic-dominated Legislature, which tends to support labor unions and workers in such issues.

Asked about the memo, Dan Schnur, a top-level assistant to Wilson, said it is no secret that “the governor believes that if this Legislature isn’t willing to accomplish real workers’ compensation reform, he’s going to make it an issue in the fall campaign.”

But prospect of being covered by health insurance brightened for some 100,000 California employees of small businesses who are not now protected. An aide to Margolin, the author, said the measure would also help some 4 million such workers retain their coverage in the future if they have it now.

The bill would require insurance companies to offer new and renewal health insurance to small employers “regardless of their (employees’) health status or risk” and to restrict renewal rate increase to a maximum 10% a year.

Affected by the bill, if Wilson signs it, would be employees of businesses with three to 50 workers. Margolin told the Assembly that because of severe fiscal constraints the bill represented “probably the best we can do” now in delivering health insurance to Californians who are not covered.

On other issues:

* Civil Rights: The Legislature sent to Wilson wide-ranging civil rights legislation by Speaker Brown aimed at overturning court decisions Brown said have eroded civil rights protections against discrimination. Among other things, it would prohibit workplace discrimination against homosexuals, a provision fiercely opposed by many Republicans. It also would prohibit employers from requiring workers to speak English and restore the authority of the Fair Employment and Housing Commission to grant certain financial relief.

* Timber: Supporters of legislation that would write new restrictions on logging in 7 million acres of privately owned timberlands gave up. The proposal was supported by Wilson, some logging companies and major environmental protection organizations. It was opposed by the Sierra Club and Speaker Brown and it was abandoned in the Assembly by its author, Assembly Byron Sher (D-Palo Alto). A compromise, it was offered up to forestall further ballot initiative fights over timber harvesting.

* School Bonds: The Senate voted final legislative approval to a proposed constitutional amendment that would roll back from a two-thirds favorable vote to a simple majority the margin necessary to pass local school construction bonds. Supported by Wilson and the education Establishment, the measure was adopted 30-to 7 and will appear on the primary ballot in 1994. Supporters say the measure is necessary to make it easier to construct billions of dollars worth of new school buildings.

* Prison. A new chapter to the long-running controversy over building the Los Angeles prison was added by the Senate early today when it passed a bill that would eliminate funds to construct the proposed lockup. Sponsored by Sen. Art Torres (D-Los Angeles), the bill went to Wilson, who administration officials said may veto it. The vote was 28-6. In addition to wiping out construction funds for the prison, the bill also would authorize funds to open the newly built, but empty state penitentary near Lancaster next year. Officials noted the Torres plan seems to invite a veto because it fails to specify where the extra Lancaster funds would found in this severely tight budget.

The bill, supported by Latino legislators from Los Angeles, would blow up the five-year-old “sagebrush-barrio” compromise, which linked opening of the Lancaster prison in the Mojave Desert to start of construction of the downtown penitentiary.

Times staff writers Jerry Gillam, Virginia Ellis, Mark Gladstone and Ralph Frammolino contributed to this story.