California High Court Stays Rate-Cutting Measure
Nov. 10, 1988
SACRAMENTO, Calif. (AP) _ The state Supreme Court on Thursday temporarily blocked deep cuts in auto insurance rates mandated by voters, but the measure's author said insurance companies can't thwart the will of the people.
Legislative leaders might ask Gov. George Deukmejian to call a special emergency session to deal with the uproar over the rate-slashing measure, said Bob Forsyth, a spokesman for Senate President Pro Tem David Roberti.
''The voters have spoken and they expect the state Legislature to implement Proposition 103,'' the leaders said in a draft of a letter to the governor.
Proposition 103 forces insurance companies to reduce rates for most liability policies, including those for cars, homes and businesses, 20 percent below November 1987 rates. The rollback would be effective when current policies are renewed.
The measure, backed by consumer advocate Ralph Nader, reduces premiums by an additional 20 percent for motorists with clean driving records and freezes premiums at those lower rates for at least two years.
California voters narrowly approved the initiative Tuesday, while rejecting four other insurance measures sponsored by insurers and trial lawyers.
In response to three insurance company lawsuits claiming the measure is unconstitutional, the high court issued an order signed by six of seven justices staying Proposition 103 indefinitely to allow time for consideration of the measure.
Nearly 50 insurance companies responded to the voter revolt against skyrocketing rates by announcing they would stop writing certain policies in California.
At least six other insurance companies, including Aetna Life & Casualty and Fireman's Fund Insurance Cos., said they have withdrawn or intend to withdraw from the auto insurance business in California.
''We're finding exactly what we feared, and that is there's no marketplace left as a result of the passage of Proposition 103,'' said Don Stewart, executive director of the Pasadena-based American Agents Alliance, a 600- member association of independent insurance brokers and agents.
''The rate rollbacks that are contained in 103 will require insurance companies to sell their products at a loss,'' said George Tye, spokesman for the Association of California Insurance Companies.
''For any business, that kind of situation creates total havoc. That's one of the points on which we're challenging the constitutionality of Proposition 103,'' Tye said.
But Proposition 103 author Harvey Rosenfield said, ''It's clear that insurance companies are now trying to shift the battle to the courts to thwart the will of the people when they lost the battle (in the election).''
''Last week, the same insurance companies were claiming the courts were at fault for high insurance rates. Our feeling is that the courts should look at this thing very carefully. We intend to intervene on behalf of all the voters. I doubt very much if the courts are going to overturn the will of the people,'' Rosenfield said.
Sen. Alan Robbins, a Democrat who chairs the state Senate insurance committee, agreed that the rate rollbacks must go into effect.
''The bottom line is the insurance companies are going to have to learn to live with the rate cut sooner or later. This (legal challenge) just postpones the inevitable,'' Robbins said.
Proposition 103 was approved despite the insurance industry's $60 million campaign seeking its defeat and passage of its own measures. It was the nation's most costly state political campaign ever.
State Department of Insurance officials said consumers need not panic about whether they will be able to renew policies or obtain new ones.
''It's premature to say what is going to happen because there are 650 or 700 firms writing property-casualty business in California,'' said Insurance Commissioner Roxani Gillespie, who is appointed by the governor.
California's insurance market is the nation's largest. Its auto insurance rates are the nation's third highest on average, after New Jersey and Alaska. Insurers blame the rates on huge damage awards in court cases and the state's high medical costs.