The big insurance companies put Proposition 30 on the ballot – so they could fight it.

San Francisco Bay Guardian

WHEN ROSEMARY SHAHAN was nine years old, her mother was severely injured in a car accident. The other driver was responsible — but his insurance company took 10 years to pay the Shahans’ $30,000 medical bills.

“I don’t want other families to have to go through this,” Shahan told us.

She’s the president of Consumers for Auto Reliability and Safety, which is fighting to pass Proposition 30, a measure on California’s March ballot that would allow individuals to sue an insurance company other than their own for “bad faith.” Currently Californians can only sue their own insurer for stalling on paying a claim.

The insurance industry is dead set on defeating Prop. 30 and is financing a lavish campaign to do it. The campaign is floating a number of arguments against the measure — including claims that it will raise premiums, encourage frivolous lawsuits, and make trial lawyers rich.

But consumer advocates say you shouldn’t buy a word of it.

Sneaky strategy

Strangely enough, it was the insurers themselves who put Prop. 30 on the ballot. The measure had already passed the state legislature and was about to become law.

So insurance company strategists hatched an unusual plan: They would gather signatures to put the legislation before the voters — and sponsor an all-out campaign to defeat it, blocking the work of state lawmakers. By the end of last year, they had raised $44 million to bring the measure down.

(Even more confusingly, Proposition 31, which also originated with the legislature and was also brought to the ballot by insurers, is an accompanying measure that only goes into effect if 30 passes. Because Prop. 31 would restrict Prop. 30, consumer advocates are pushing a Yes vote on 30 and a No vote on 31 — although neither side is devoting much energy to 31 for fear of confusing voters.)

Calls to the No campaign were not returned, but a Dec. 10, 1999, industry newsletter called Smart’s Insurance Bulletin gives a glimpse of the industry’s strategy. “Insurers have taken a page from former President Ronald Reagan’s Cold War strategy towards the former Soviet Union: to win the war through attrition by spending the other side into the ground,” an article reads. ” ‘The total key to everything we do from now on regarding … the governor and the Democrats is going to be based on dollars,’ said a Sacramento industry insider. ‘The message we’re going to send is, ‘You will either leave us the hell alone, or you better have pockets so deep you won’t have room for your balls.'”

Fighting back

Insurance companies have a financial incentive to delay paying claims — the longer they hang onto the money they owe, the more interest they rack up. They’re most likely to put off paying claimants who are the least equipped to take them on — seniors, poor or disabled people, and people who don’t speak English.

So consumer advocates have risen up to meet them. Doug Heller of the Foundation for Taxpayer and Consumer Rights calls the insurance lobby’s strategy “an outrageous carpet-bombing of the California electorate by a few arrogant out-of-state insurance companies.”

That carpet bombing consists mostly of constant television ads designed to get voters clutching their pocketbooks to their chests. In one, the announcer warns, “You don’t need another worry about making ends meet — like the extra $300 a year laws like Propositions 30 and 31 will add to your insurance bill.”

But laws like Prop. 30 exist in about half the country. Heller says the Foundation for Taxpayer and Consumer Rights has found no correlation between those laws and higher rates.

Backers of Prop. 30 also insist the insurance giants are wrong to say the measure will lead to needless litigation. Rather, they say, the threat of legal action will pressure insurers to settle claims promptly — thereby discouraging the kind of standard claim suit that is already both legal and common.

“Any consumer would get a weapon: Deal with me fairly, or there will be consequences,” Thomas J. Brandi of Consumer Attorneys of California told the Bay Guardian.

Bad arguments

The industry’s other chief tactic is to paint the measure as a cash cow for trial lawyers like Brandi. It’s true that attorneys have contributed much of the Yes on 30 campaign’s money — which, at $2.5 million, comes in at less than 6 percent of the insurance companies’ war chest. But the measure’s backers include Ralph Nader and other consumer advocates, labor unions, and seniors groups.

The No side, on the other hand, has to rely on invented consumer groups to fill its endorsement sheets. One of the campaign’s backers is Progressive Campaigns/Voter Revolt — a professional signature-gathering firm that the campaign has paid more than $1 million.

Insurers also say that the measure would allow drunk drivers to sue and would threaten public entities such as school districts with burdensome lawsuits. But Prop. 30 includes provisions that prevent convicted drunk drivers from suing and public institutions from being sued.

In fact, it contains a slew of protections. The insurance industry lobbied for many of them when the measure was working its way through the legislative process in Sacramento.

That’s also when the companies got a separate bill drawn up to mitigate the original legislation’s effect on the industry. As a consequence of their electoral strategy, they had to take that bill to the ballot as well, as Prop. 31.

So Prop. 30’s supporters hope 31 won’t make it — in which case the industry willlose some of the protections it pushed for in Sacramento.

“Yes on Prop. 30 and No on Prop. 31 would bring the toughest reform,” consumer advocate Kelly Hayes-Raitt said. “If that’s what happens, the insurance companies will have spent $50 million and they’ll be worse off.”

Brandi sums up the debate over Props. 30 and 31 this way: “It really asks the question: Who should be protected — the victim of a bad driver’s act, or the insurance companies?”