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Oct 08, 1999

CONTACT: Doug Heller - 310-392-0522 x309

Governor Davis Signs Anti-Low-Balling Law

Insurers Considering Referendum to Stop Consumer Protection
Sacramento -- Governor Gray Davis signed SB 1237 (Escutia) and a companion bill -- AB 1309 (Scott) -- today to provide accident victims a legal remedy when an insurance company denies delays or lowballs a claim due to the victim. Insurers of at-fault drivers will now be held accountable for unfair claims practices. This will lead to more equitable and timely insurance claim settlements, according to The Foundation for Taxpayer and Consumer Rights (FTCR), which had, in March 1999, issued a study of insurance claims patterns since consumers lost the right to in 1988.

"Low-balling innocent accident victims is now a punishable offense," said Doug Heller, consumer advocate with FTCR. "Insurance companies will have to learn to play fair, because ten years of grinding down claims without any real oversight has finally come to an end."

The March study by FTCR found that California insurance companies
  • decreased the inflation-adjusted value of a liability claim by 29.1% in California. In 1998, Californians received one quarter less for a claim than the national average;
  • decreased the actual value of a liability claim every year since 1992 -- no other state has seen such a consistent decline;
  • paid 26% fewer claims to California accident victims while accident victims nationwide saw an 8.5% increase in claims settled;
  • reduced overall liability payments by 29.2% while payments have increased nationwide by 25.9%.
  • increased profit margins by 300%, largely by cutting the percentage of premium returned to accident victims by 40%.
  • received more than 8.5 billion dollars in auto liability premiums from Californians, but paid out less than half that amount (4.17 billion dollars) in claims in 1997.
During legislative hearings on the bill, FTCR was joined by auto accident victims hit by drunk drivers who have waited as long as two years without being offered a fair settlement by the at-fault driver's insurer. FTCR submitted testimony on behalf of numerous others who have been denied, delayed or low-balled by insurers. The non-profit organization also uncovered a series of State Farm documents which exposed the insurer's efforts to train their claims personnel how to take advantage of injured victims through delay tactics and in the setting of low-balling goals. FTCR sent these internal documents to Governor Davis on a daily basis until he agreed to the final legislation.

The bill, modified from its original form to address Governor Davis' and insurers' concerns about the impact of the proposal, allows injured accident victims to sue the insurer of the at-fault party if the insurer does not pay a claim in a fair and timely manner. The bill and its companion contain several provisions which ensure that a fair-dealing insurer will not be a target of a bad-faith suit. Insurers cannot be sued, for example, if a company agrees to participate in binding arbitration in accidents valued below $50,000.

Insurance industry lobbyists have hinted that they will try to place a referendum on the March 2000 ballot to overturn the new consumer protection law.

"Consumers should contact their insurance company and tell them not to use policyholder money to fund a referendum campaign directed against the rights of innocent accident victims," said Heller.


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