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home / insurance / in the media

Oakland Tribune
Feb 14, 2000

Consumers Need Propositions 30 and 31

Tribune Editorial
WHEN a special-interest group spends $50 million -- and counting -- to put a proposition on the ballot and get Californians to cast votes against it, you have to be little leery.

Such is the case with some of our nation's largest insurance companies and Propositions 30 and 31, which if passed would activate a law passed by last year's Legislature and signed by Gov. Gray Davis. It gives Californians the right to sue a negligent driver's insurance company if it refuses or delays payment of a bona fide settlement.

State Farm, Allstate, Farmers and other mainstays of the insurance industry are paying dearly to block it. By the end of January, they had coughed up $50 million. By March 7, spending by both sides could rival the record $100 million spent on the Indian gambling proposition in 1998.

Unfortunately, the legislation provides a tool Californians apparently need to get fair and equitable treatment from insurance carriers representing bad drivers. We therefore recommend a yes vote on Props. 30 and 31, putting the laws passed last year into effect.

At the behest of consumers and trial lawyers, the Legislature passed SB1237 authored by Sen. Marta Escutia, D-Whittier, on the premise that for the past 12 years, insurance companies in our state have too often withheld or delayed payment of legitimate claims by injured parties. The benefit for them has been increased interest and profits gleaned by holding onto the money.

Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa Monica provides underpinning for that argument, pointing out how the insurance payment pattern in California contrasts with the rest of the nation. While the number of claims paid nationwide increased 8.5 percent over the past decade, they plummeted 26 percent in the Golden State. The same trend applies to the value of claims -- amounts dropped 4.5 percent here and jumped 16 percent elsewhere.

Proponents of Props. 30 and 31 attribute California's decline in both stats to a 1988 state Supreme Court ruling that rescinded the right of accident victims to sue the insurer of at-fault drivers.

Since then, plaintiffs have had to sue the driver to get to the insurance company. Even then, there was no guarantee of being paid promptly. Proponents say insurance companies purposely dragged their feet on payments, especially to the elderly, sick or poor, knowing that the odds of having to pay such people, particularly higher amounts, dwindles with time.

The new law allows you to sue a negligent party's insurer for bad faith, but only after the victim has gone to court and received a judgment greater than the amount sought originally. Victims also may not sue if they've accepted a settlement offer or if the case involves less than $50,000, which means most cases.

Insurance companies that have poured so much money into defeating this legislation argue that it will increase litigation, the size of settlements and insurance premiums for homeowners, businesses and drivers. Bigger, quicker settlements, however, are part of the goal.

Proponents also say litigation doesn't have to go up, since court appearances can be avoided altogether if a company agrees to third-party arbitration in cases of less than $50,000. As for premiums, Prop. 30 and 31 advocates say if they go up it will be the doing of insurance companies.

According to the consumer foundation, profit margins for insurance firms quadrupled in the past decade, leaving room for higher claims and stable or reduced rates.

It amounts to a trade-off: If consumers need and want the right to sue recalcitrant insurance companies, they're probably going to increase our premiums.

Judging by the past, it appears that many Californians, especially the least powerful and affluent among us, need that right.


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