Assembly OKs Bill Permitting Suits Against Insurers

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Los Angeles Times

Sacramento– Consumers would have added recourse against insurance companies through a controversial measure that passed the Assembly on Thursday.

The bill, SB 1237 by Sen. Martha Escutia (D-Whittier), would allow consumers to sue for bad faith when they think insurers have unfairly delayed or reduced settlements.

Republicans, however, claim the provisions of the measure–which would invalidate a 1988 state Supreme Court decision–would raise insurance premiums by at least 14%. They are joined in opposition not just by insurers but also by a long list of chambers of commerce and business associations from around California.

“Lawyers, lawyers, lawyers, that’s what we are inviting to this process,” said Assembly Minority Leader Scott Baugh (R-Huntington Beach).

The bill, which passed 43-26 largely along party lines, must return to the Senate for final approval before it goes to Gov. Gray Davis. He has been involved in negotiations on the bill but has not taken a formal position.

Supporters rejoiced in the new provisions, which would apply only when victims have first won a suit against the person who injured them.

“This has made California a no-low-balling zone,” said Doug Heller, of the Foundation for Taxpayer and Consumer Rights, a key sponsor of Proposition 103, which a decade ago rolled back auto insurance premiums.

Heller maintains that since the 1988 court decision, insurance companies have “ground down claims” in California so much that they are 25% lower than in the rest of the nation.

Mark P. Robinson Jr., a trial lawyer who heads the Consumer Attorneys of California–the bill’s sponsor–called its final form “a compromise of mammoth proportions.”

Last-minute negotiations aimed at attracting enough Democratic support carried on through the night Wednesday and then spilled onto the Assembly floor, bringing all activity to a standstill for two hours Thursday.

Opponents objected to the hurried pace.

“We know why they did that: so there can’t be any public scrutiny,” said John H. Sullivan, president of the Civil Justice Assn. of California, formerly known as the Assn. for California Tort Reform.

Among the key changes in the bill: All claims under $ 50,000 could first go to arbitration instead of court; drunk drivers are prevented from suing for bad faith; and to sue an insurance company, victims must receive a court judgment of more than their original demand in their suit against the insured person.

Although the issue was expected to spark fireworks in the Legislature because it involves two powerhouses in campaign donations–trial lawyers and insurance companies–Democratic dominance in the Assembly muted much of the opposition.

Consumer Watchdog
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