No-Frills Auto Insurance

I am writing to express my disappointment over your editorial (Sept. 3) urging the governor to veto SB 10, a measure to produce a low-cost, no-frills automobile insurance liability policy.

It is true that SB 10 does not include “no-fault,” but it is not true that SB 10 “does not produce enough savings.” As pointed out in your editorial, SB 10 would create a basic coverage policy with an average cost of $288. That means real savings for Los Angeles as well as most California drivers.

SB 10 directly attacks bodily injury liability costs and would produce significant, real savings. First, it limits double recoveries by the plaintiff by modifying the collateral source rule. Second, SB 10 establishes a medical fee schedule and medical injury profiles to control medical costs and deter overtreatment. Non-hospital medical costs would decrease by 20%, according to an actuarial analysis.

These reforms combined would significantly reduce the special damages award that will have a corresponding effect of also reducing the general damages (or pain and suffering) award. This reduced award will result in a reduced attorney’s contingency fee. All of which combine to produce real savings in bodily injury liability costs.

Another provision of the bill that requires the mandatory exchange of claims information would reduce the gamesmanship in discovery and is estimated to save about $200 million, about one-sixth of total defense litigation costs.

An underlying premise of your editorial is that “no-fault” will save more and is therefore better. It is not clear that “no-fault” will indeed save money. The proposed “no-fault” plans provide a vastly different product for $220 to $255 and provide no protection against tort liability for a serious injury. “No-fault” insurers would have to hire their own lawyers to defend against the tort lawsuit and would have to pay any judgment out of their own pockets. When you add that cost or the cost of buying add-on bodily injury coverage, “no-fault” is really not cheaper.

SB 10 is opposed by the insurance industry, the trial lawyers, the health care providers and the car repair shops--groups which have a vested interest in preserving their stake in the status quo. I believe their strong opposition is proof that SB 10 will produce significant savings. I might also add that the Consumers Union has revised its opposition in light of the new actuarial analysis. Its main objection now is that SB 10 would require proof of insurance at the time of vehicle registration without guaranteeing an affordable policy. The actuarial analysis shows that a policy can be sold for $288 statewide.

BILL LOCKYER, State Senator, D-Hayward