Auto Insurers Win Ruling in State High Court

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Steve Poizner, ex-state insurance chief, joined the effor...

In a victory for insurance companies, the state Supreme Court left intact Wednesday a ruling barring consumers in California from suing automobile insurers over their rates.

Consumer and civil rights groups, joined by the city of San Francisco, state Insurance Commissioner Dave Jones and his predecessor, Steve Poizner, had urged the court to erase the October appellate decision as a precedent. They argued that it would seriously weaken Californians' protection against excessive or illegal rates.

The court's unanimous denial of that request makes the appellate decision binding on trial courts statewide.

It allows consumers to take their complaints to the state insurance commissioner, whose decisions can be challenged in court. But consumer groups say even a successful court challenge would lead, at most, to a rollback of future rates and would not include reimbursement for past overcharges.

The dispute involved Proposition 103, a 1988 initiative that authorized the commissioner to review proposed auto insurance rates, and other property and casualty rates, and reject those that were excessive or based on improper factors. Prop. 103 did not apply to health insurance, which is subject to less state regulation.

Customers of 21st Century Insurance Co. claimed in a lawsuit that the company was illegally requiring policyholders to show previous insurance coverage in order to qualify for good-driver discounts, a practice banned by Prop. 103.

The company denied any violation and said its discount practices were part of a rate plan that the insurance commissioner had approved in 1998.

While the legal dispute was pending, the two sides negotiated a settlement, still awaiting final court approval, that would provide reimbursements of up to $115 each for 283,000 customers who were insured by the company between October 1997 and October 2005, said Drew Pomerance, a lawyer for the customers.

In future cases, however, the Second District Court of Appeal in Los Angeles said, customers can't sue insurers over any practice that was included in a rate approved by the insurance commissioner.

Prop. 103 barred such suits by preserving an earlier state law exempting insurance rate setting from consumer and civil rights laws that allow individuals to sue businesses, said Justice H. Walter Croskey in the 3-0 ruling.

The ruling was denounced by Prop. 103's author, Harvey Rosenfield, who had asked the state's high court to erase the appellate case as a precedent.

"This is an abdication of the judicial branch's responsibility to enforce the law that the voters passed," Rosenfield said Wednesday.

He said questionable rate practices often go undetected by the insurance commissioner's overworked staff, are seldom discovered by policyholders in time for a legal challenge, and are virtually immune from redress as a result of the ruling.

The case is MacKay vs. Superior Court, S188184.


E-mail Bob Egelko at [email protected].

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