No-Fault Measure’s Support Is Waning

For the second time in eight years, California voters are faced with deciding whether to institute a no-fault auto insurance system, this time in the form of Proposition 200.

But with a week left in the campaign, backers of Proposition 200 see their no-fault initiative languishing in public opinion polls, just as it did in 1988, when 75% of the electorate voted against no-fault.

Proposition 200, one of three anti-litigation measures on next Tuesday’s ballot, would have the most significant impact on Californians, instituting a so-called “pure no-fault” system in which drivers in virtually all instances would be barred from suing motorists who cause accidents.

While several states have adopted no-fault insurance systems, California would become the only state in the nation with so-called pure no-fault.

A driver’s own insurance company would cover car damage and injuries, including those to occupants. In exchange for giving up the right to sue, proponents say, drivers would get lower insurance rates.

California’s car insurance rates are the eighth-highest in the nation, averaging $781 a year statewide. But in urban California, especially Los Angeles, rates can be three times that amount or more. At least 5 million, and perhaps as many as 7 million, motorists have no car insurance, largely because many cannot afford such rates, experts say.

“You trade one benefit for another,” said Brian Sullivan, editor of Auto Insurance Report, which has taken no position on Proposition 200. “People have to ask themselves, ‘Do I want to save $100 to $200 a year in premiums, to give up my right to sue?’ ”

“The system we have now is a disaster,” said Assemblyman David Knowles (R-Placerville), a backer of the initiative and chairman of the Assembly Insurance Committee. “The system only works if you’re hit by Ross Perot and you can prove it.”

Leading the opposition are attorneys who represent accident victims and, recently, defense lawyers who represent insurance companies. They have funded an aggressive television ad campaign featuring a driver recklessly running a stop sign while talking on a cellular phone. As the driver plows into a family car, a narrator warns that the family would have no recourse to sue the wayward motorist.

“It will be a tragic situation,” says Gary S. Sherman, a Woodland Hills attorney who occasionally handles suits over car accidents. “I can see it happening--people walking through the door and telling me their problems, and I’m going to have to say, ‘Sorry.’ ”

Proponents of Proposition 200 have failed to gain support from what might have been key allies--consumer groups and the insurance industry, which could have financed a counterattack on the airwaves.

“The fact is,” said Bill Zimmerman, campaign manager for the three anti-litigation measures, “we were trying to lead the insurance industry on something that would have benefited the insurance industry and consumers, and hurt lawyers, and they failed to join us.”

The insurance industry, which generally endorses no-fault, sponsored the no-fault initiative that failed in 1988, in a bruising $80-million initiative war. As a result, industry lobbyists no longer are interested in initiative fights. They are hoping that they can gain a no-fault law in the Legislature.

Insurance Commissioner Charles Quackenbush, who has broad power over the auto insurance industry, also is staying out of the fight.

Richard Wiebe, Quackenbush’s spokesman, said: “We’re prioritizing. If 200 had a shred of hope of passing, we’d be spending more time on it.”

Despite such assessments, financial columnist and author Andrew Tobias, the driving force behind the no-fault measure, holds out hope that “people are going to realize in the last days of the campaign that they’re being played the fool by the lawyers.”

Tobias first became interested in insurance while writing about the industry in his 1982 book, “The Invisible Bankers.” He later proposed a no-fault system paid for by an added gasoline tax, the so-called pay-at-the-pump plan.

He dropped pay-at-the-pump, but joined with campaign consultants and Silicon Valley computer engineer Tom Proulx to push no-fault as part of the package of three initiatives on Tuesday’s ballot.

“I decided this is my call,” says Tobias, based in Miami and New York. “You only live once, and this is apparently what I was set on Earth to do.”

To help draft the measure, Tobias turned to campaign consultant Michael Johnson, a former aide to ex-Insurance Commissioner John Garamendi. Under the statute they propose, people would buy a standard policy providing up to $1 million in medical coverage for the driver and all occupants. The cost of such a policy is not spelled out in the initiative.

The measure provides that people could buy pared-down policies, providing them with as little as $50,000 in coverage for themselves and each occupant. Drivers also could buy more coverage.

In an accident, people would turn to their insurance companies for coverage. Insurance companies would determine whether medical bills are legitimate. Companies would be assessed 2% interest per month for failing to cover legitimate claims.

Unlike the current system, in which uninsured drivers can sue if they are hurt in an accident, people without insurance would get no coverage, no matter how bad their injuries. Quackenbush is pushing an initiative for the November ballot specifically aimed at denying uninsured motorists the right to sue over car accidents.

While there is no requirement in Proposition 200 that rates must fall, Tobias and other backers predict rate drops of 25%, largely because the initiative removes the cost of litigation and eliminates the incentive to inflate injury claims.

For support, proponents cite a Rand Corp. study. Using statewide averages, Steve Carroll of Rand concludes that under Proposition 200, people who have insurance now and buy the $1-million policy would save about 11% over their current costs. People who buy minimum policies could save 44%.

But even if rates fall 25%, the cost of insurance will still be beyond the reach of many poor Californians. And with the requirement in the proposition that people show proof of insurance before they register their cars, opponents worry that people who can’t afford insurance simply won’t register. If they cannot register their cars, they risk having them seized under the proposed initiative.

“It’s a good idea that will, unfortunately, punish 5 million low-income and student drivers,” said the Greenlining Coalition’s Bob Gnaizda, a longtime public-interest lawyer.

Gnaizda and several consumer advocates cite Michigan as having an ideal no-fault system, and vow to pursue such a system in the Legislature. In Michigan, people can receive unlimited coverage for injuries and can sue in extreme situations. Insurance there costs an average $115 less than in California.

In the Legislature, bills by Republicans and, to a lesser extent, Democrats to institute no-fault auto insurance have stalled repeatedly, largely due to the influence of the California trial lawyers association.

“I’m sure the Democrats will use the election results as an excuse to kill no-fault,” said Assemblyman Jim Brulte (R-Rancho Cucamonga), who is carrying an insurance industry-backed no-fault bill.

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A Look at Proposition 200

Here is an explanation of Proposition 200:

Q: What would Proposition 200 do?

A: It would scrap the current litigation-based auto insurance system for a no-fault system in which almost all lawsuits would be barred. A driver’s insurance company would cover his or her injuries. Drivers would need to show proof of insurance to register their cars.

Q: Could drivers ever sue?

A: Drivers could sue car manufacturers for defects, governments for road hazards or insurance companies for failing to pay legitimate claims. Suits also could be brought against drunken drivers who caused accidents. But the suit would have to be against the drunken driver as an individual, not the driver’s insurance company, so chances of collecting money are lower.

Q: What would a Proposition 200 policy cover?

A: The standard policy would cover drivers and each occupant for up to $1 million. Drivers, however, could buy policies providing as little as $50,000 for themselves and each occupant. Motorists could also buy more than the standard policy.

Q: Would 200 lower rates?

A: There is no requirement that insurance rates be lowered. Backers say rates would drop an average of 25%, because the high cost of litigation would be removed from the system. Opponents point to other states that have no-fault insurance and still have rising rates.

Q: Would rates rise after an accident?

A: Insurance companies could raise rates if the driver they cover caused the accident.

Q: How would disputes be handled?

A: If insurance companies refused to pay medical costs, the matter would go to arbitration. Insurance companies could be liable for 2% interest per month for failing to pay promptly.

Q: Who supports Proposition 200?

A: Financial writer Andrew Tobias is the main backer, along with the Alliance to Revitalize California, the campaign group behind Proposition 200 and the other two anti-litigation initiatives on the ballot. Gov. Pete Wilson and the California Taxpayers’ Assn. also support the measure. Insurance companies have stayed out of the fight, as has Insurance Commissioner Chuck Quackenbush.

Q: Who opposes Proposition 200?

A: Opponents include trial lawyers, Ralph Nader, Consumers Union and the Consumer Federation.