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NEWS RELEASE
Oct 12, 1999


CONTACT: Doug Heller - 310-392-0522 x309

State Farm, Other Insurers Submit Referendum to Stop Consumer Protection Law

Insurance Industry Already Trying to Hide
Insurance companies filed two referenda today with the Secretary of State's office to undo consumer protection legislation signed by Governor Davis last Friday. The laws, SB 1237 (Escutia) and an accompanying bill, AB 1309 (Scott), would provide innocent accident victims the right to sue an at-fault drivers' insurance company if it unfairly denied, delayed or low-balled a legitimate claim.

Consumer advocates scoffed at the industry's likelihood of success. "The last time the insurance companies tried to block consumer reforms at the ballot box, they spent $63 million and lost overwhelmingly," said Harvey Rosenfield, the consumer advocate who authored the winning initiative, Prop. 103, in 1988. "They are crazy to open this Pandora's box when the polls show that people are sick of being low-balled and abused by auto insurance companies; the legislation they are attacking is so compromised and modest it's a far cry from what really is needed. Any initiative backed by the insurance companies is DOA and trying to hide behind a phony coalition of lobbying groups paid by the insurance industry is not going to work."

State Farm Fears Accountability After Recent $1.18 Billion Dollar Fine for Claims Fraud

State Farm, the most vocal insurer opposing the legislation, will likely be the chief financial backer of the campaign with the assistance of a few other major insurance carriers, according to advocates with the Foundation for Taxpayer and Consumer Rights (FTCR), a supporter of the original version of the anti-low-balling bill signed by the Governor. State Farm -- whose low-balling techniques were exposed this summer in documents uncovered by FTCR -- was fined over one billion dollars in damages in recent days for unfairly supplying accident victims with shoddy car replacement parts.

Because the insurance companies know they cannot defeat the consumer reforms directly, they are following a strategy intended to conceal their role, according to FTCR. No insurance company is affiliated with the referendum in their initial communications with the Secretary of State. The signatories of the referenda are a "who's who" of lobbyists who have been hired to participate in a anti-consumer coalitions in the past. This is a standard tactic of Goddard-Claussen, the firm hired to run the referendum campaign.

"Insurance companies make more profit when they low-ball accident victims, and they will do anything to protect their immunity from courtroom accountability," said Doug Heller, consumer advocate with FTCR and author of a March 1999 study documenting insurance industry low-balling. "The law signed by Governor Davis was a compromise bill which provides consumers important, new remedies and still allows insurance companies plenty of opportunities to avoid lawsuits."

By virtue of submitting the referendum to the Secretary of State, the law is automatically suspended for 90 days and, if the insurance companies get enough signatures (approximately 700,000), the law will be stayed until the voters decide whether or not to implement the law.

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