Will an insurance company buy Democrats' souls?
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Aug 29, 2002

Will an insurance company buy Democrats' souls?

by Jamie Court
Jamie Court is executive director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.
The last days of the legislative session are notorious for eleventh-hour backroom deals and greased lightning legislation that can clear every rules hurdle in mere hours. But even by these standards, this year's shenanigans have all the makings of the final test for the souls of the Democratic leaders.

They are quietly engaging in class warfare on behalf of cash-rich special interests whom the politicians seem to believe have more to do with the party's control of the Capitol than Democrats' traditional allegiance to the poor.

State Sen. Don Perata, D-Oakland, is a case in point. He rose from local to statewide leadership with populist pledges of protecting average folks from special interests. But the self-professed, life-long progressive authored two eleventh-hour bills targeting the poor, in a recession, on behalf of corporations that contributed generously to his campaign around the time the last-minute legislation was hatched.

Perata's predatory lending legislation would have prevented local governments from passing stronger protections for seniors scammed out of their home equity. A consumer backlash forced him to withdraw the bill this week.

The more insidious Perata end-of-the-session special, on the fast track to pass, allows insurers to surcharge previously uninsured motorists -- in violation of voter approved Proposition 103, the state insurance commissioner's authority and court rulings. Perata's SB689 targets those who have gone without insurance or who have let their insurance lapse for more than 90 days -- primarily low-income people who, for a variety of reasons (unemployment, medical emergency, etc.) cannot afford to pay their automobile insurance premiums.

Perata's logic: Surcharging the poor for not having insurance is less important than insurers' word of honor about giving a discount to middle-class consumers. Unfortunately, SB689 guarantees no savings for any driver and will likely lead to higher premiums for all, because more motorists will stay uninsured, resulting in higher premiums for the "uninsured motorist" coverage that drivers buy to protect from being hit by an uninsured driver.

The real motive behind SB689 is campaign cash, and Perata is not the only taker. The bill's sponsor, Mercury Insurance, led by CEO George Joseph, has contributed $1,077,550 to state lawmakers and candidates since 2000, when it first began its assault on Section 1861.02(c) of the Insurance Code. That law forbids insurance companies from surcharging motorists who are buying insurance for the first time or have a lapse in coverage. Mercury and other insurers are being sued for systematically violating this law, enacted through Proposition 103, and the insurance commissioner has issued new rules to prevent insurers from future violations.

To buy its way out of trouble, Mercury has donated to 25 state senators and 56 assembly members -- two-thirds of the California Legislature. (Not coincidentally, the bill needs a two-thirds supermajority to pass.)

Forty-five Democrats and 36 Republicans were recipients of Mercury's largesse. Sen. Perata himself got $25,000 on June 14, just six days before the first failed effort to push the bill through the Senate insurance committee. That bill was defeated after the insurance commissioner's office testified that the bill had no actuarial validity.

Desperate, Mercury/Perata have now rushed another bill before the Assembly. SB689 appears to have the Democratic Party leaders' blessing. With rule waivers, it sailed through an impromptu Assembly insurance committee hearing Monday night (convened conveniently after reporters' deadlines). Former insurance commissioner candidate and committee chair Tom Calderon, D- Montebello, received $174,000 from Mercury. Hoping for a signature on the bill, Mercury has given Gov. Gray Davis $102,500.

Mercury also contributed $150,000 to a failed initiative to extend term limits. Now that term limits are set in stone, Democratic leaders should remember that all they have left is their souls.

Can one insurance company buy the soul of the Democratic Party? The jury is out, but the signs are that the only class many Democratic leaders care about is their own. There's still hope that principle will prevail in the often more enlightened state Senate.

It's hard to argue with politicians about legislative ethics, but they should know that engaging in the strategy of class warfare is a slippery slope.

Trading away allegiance to the poor for campaign cash is a Faustian bargain that has no winners. How can the donkeys complain about the elephants when they big-foot the little guy, too?

Senate Democrats with the power to stop SB689 should remember their predecessors, notably Phil Burton, heroic defender of the poor. Biographer John Jacobs wrote of that San Francisco leader: "He saw the world as his jurisdiction and never forgot whom he cared about or why he was in politics. Burton was completely secure about what drove him -- a visceral rage for justice."
The above op-ed ran in The San Francisco Chronicle on 8/29/02. http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2 002/08/29/ED223839.DTL

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