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home / insurance / in the media

The Recorder
Mar 14, 2001

by Kevin Livingston

Court Urged to Take On Redlining

In rare move, legislators call on Supreme Court to review insurance case
A group of lawmakers Tuesday took the rare step of calling on the California Supreme Court to review whether insurance companies can base auto insurance rates on where their customers live.

Led by Senate Judiciary Chairwoman Martha Escutia, D-Montebello, and Senate Insurance Chairwoman Jackie Speier, D-San Mateo, a handful of legislators -- including members of the Latino Caucus -- publicly asked that the court consider overturning a First District Court of Appeal opinion allowing auto insurance rates to be determined by a customer's zip code.

A unanimous First District panel found last January that the practice was not illegal and not in violation of 1988's voter-approved Proposition 103, which was supposed to force insurance companies to primarily set auto premiums based on a customer's driving record, experience and the number of miles driven.

Lawmakers Tuesday called that practice discriminatory because it unfairly targets poor inner-city drivers who are often minorities -- charging customers more than double what it would cost an identical driver from an affluent suburban neighborhood. For instance, they cited data provided by Prop 103 sponsor, The Foundation for Taxpayer and Consumer Rights, which shows a driver who lives in Oakland would pay almost 50 percent more in premiums than an identical driver who lives in San Carlos.

Escutia, who recalled that she couldn't get a car until she was 30 because rates in her East Los Angeles neighborhood were too high, said Tuesday that it's time for the state Supreme Court to step in and resolve the matter.

"I demand that this review happen as a matter of fairness," she said, adding that a decision not to take the case would be an affront to the will of the voters.

Speier called the regulations discriminatory. "The voters wanted their premiums to reflect their driving record," she said. "It is indeed discrimination."

If the justices do take the case, it will not be the first time the issue will go before the state's highest court. Prior to the passage of Prop 103 the court in 1987's King v. Meese, 43 Cal.3d 1217, found that although residence was probably not the best indicator of rates, it was a matter for the Legislature to resolve.

Legislation was later implemented in the form of a voter-approved initiative, but under former Insurance Commissioner Chuck Quackenbush new Department of Insurance regulations were implemented to allow insurance companies to continue to use zip codes as barometer to set rates.

An Alameda County trial court later found that the scheme violated Prop 103, but that decision was reversed by the First District. In his opinion, retired Justice Daniel "Mike" Hanlon said where a customer lives "is a more important determinant of the risk of loss than any other single factor."

In a letter to the Supreme Court dated Monday, Escutia called that ruling "a dangerous and far-reaching decision, which conflicts with legal precedent."

Still, Insurance Commissioner Harry Low has no intention of litigating the matter further. Low, a former First District Court of Appeal justice who succeeded Quackenbush when the former commissioner stepped down in July, has asked that the justices let the appellate ruling stand. In a March 1 letter to the court, Attorney General Bill Lockyer, on behalf of the Department of Insurance, writes that the Court of Appeal conducted a thorough analysis of the case, and there's no need for further review.

"Surely the California courts have done their full duty in providing appellate relief in this case," Lockyer writes.

Chief Justice Ronald George said he had no comment on the actions of the legislators Tuesday and simply said he couldn't comment on any matter pending before the court. The justices have until mid-May to make a decision.


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