Protect Initiatives, Legislature Warned : Legislation: State appeals court strikes down a 1990 law that exempted the surety insurance industry from provisions of Proposition 103.

In a decision with broad implications for the California initiative process, a state appeals court ruled Wednesday that when voters tell the Legislature not to meddle with an initiative, the lawmakers must listen.

The 2nd District Court of Appeal, on a 2-1 vote, struck down a 1990 law that exempted the surety insurance industry from the provisions of Proposition 103, the 1988 insurance-reform initiative.

Proposition 103 supporters vowed Wednesday to use the ruling to overturn other amendments, which they say significantly weaken the initiative and will cost consumers millions of dollars.

“What this decision says to the Legislature is, ‘Keep your filthy hands off Prop. 103,’ ” the initiative’s author, Harvey Rosenfield, exulted Wednesday night.

The company involved in Wednesday’s decision, Amwest Surety Insurance Co. of Woodland Hills, said it would appeal to the California Supreme Court.

The appeals court, reversing a lower court ruling, said that lawmakers ignored plain language in Proposition 103--common to other California referendum measures--that bars the Legislature from amending the initiative “except to further its purposes.”

Rather than furthering Proposition 103’s purposes, the Legislature has been dismantling the measure piecemeal ever since it passed, Rosenfield charged.

He cited three bills that Gov. Pete Wilson signed into law in October. One of the laws relaxes Proposition 103’s antitrust standards designed to prevent insurance price-fixing. Another grants automatic approval of rate-increase applications unless the insurance commissioner acts on them within 180 days. The third protects insurance agents from having to rebate any of their commissions under terms of the proposition.

Insurance Commissioner John Garamendi said the ruling shows that courts “will not rubber-stamp the kind of legislative favors to the insurance industry that gave rise to Proposition 103 in the first place.”

The surety industry provides completion bonds and other kinds of performance guarantees for construction projects, movies and other ventures.

After the initiative passed, Amwest filed a lawsuit arguing that it should be exempted because “Proposition 103’s authors had no knowledge of the surety business” and didn’t mean to include it.

Meanwhile, Amwest and other surety companies were making the same argument to the Legislature.

Voter Revolt, Rosenfield’s organization, then intervened in the Amwest court case and argued that the Legislature had exceeded its authority because exempting an entire line of insurance certainly couldn’t “further the purposes” of Proposition 103.

Judge Dzintra I. Janavs in Los Angeles Superior Court rejected Voter Revolt’s arguments.

But the appeals court Wednesday said: “The courts cannot simply defer to legislative findings which attempt to justify amendments to initiatives.”