The San Francisco Chronicle

Sacramento — Controversial legislation aimed at giving some motorists a break on their car insurance costs has been signed by Gov. Gray Davis, prompting a promise from an insurance-reform activist that he will sue the state.

Over the weekend, Davis approved a bill carried by state Sen. Don Perata, D- Oakland, that will allow insurance companies to offer discounts to motorists who have maintained insurance for several years. The measure, pushed by a Los Angeles-based company that has pumped millions into politicians’ campaigns, is very similar to legislation Davis vetoed last year.

Perata argues the bill could lead to cheaper insurance for many drivers.

But opponents said that it was an illegal amendment to Proposition 103, the 1988 voter-approved insurance initiative, and that it would make it harder for the uninsured to find coverage.

Davis’ signing has enraged consumer activist Harvey Rosenfield, the author of Proposition 103, who has said he will file a lawsuit over the bill. Rosenfield is expected to announce Thursday whether he will run for governor on the recall ballot, and he said Tuesday that Davis’ signature on the bill might be “the straw that breaks the camel’s back.”

The measure is backed by Mercury Insurance, a big contributor to politicians. The Los Angeles-based company has given more than $1.2 million to lawmakers since 2001, and $220,000 to Davis.

Perata received $25,000 from Mercury Insurance last year when he first pushed the bill. He said he believed in the bill and didn’t apologize for accepting money from Mercury, which he called a good California business that has a long history of supporting Democrats.

“The bill rewards good drivers,” Perata said. “It gives them something they can shop around with to get a better deal.”

Davis vetoed the same bill last year, saying he was concerned it did not comply with Proposition 103.

But this year, legislative lawyers concluded the bill would stimulate competition among insurance companies, a key tenet of Proposition 103. A Davis spokesman also noted the governor had asked Perata to draft another bill this year that would end the original bill in five years and require a study of how the bill is affecting insurance costs.

“If it does have adverse affects, we’ll revisit it and do away with the bill,” said Russell Lopez.

Rosenfield isn’t alone in his opposition.

Insurance Commissioner John Garamendi wrote a letter to Davis two weeks ago urging the governor to again veto the bill.

Garamendi argues it will result in very small discounts for some drivers and most likely force insurance companies to raise rates for previously uninsured drivers to subsidize the rebates. That means teenagers, immigrants and the poor will have a tougher time finding affordable insurance.

Garamendi also told the governor he expected his department to have to spend more than $250,000 defending the lawsuit Rosenfield vows to file. It’s a lawsuit Garamendi doesn’t expect to win; he lays out the case against the state in the letter.

Rosenfield and consumer groups accuse the governor of signing the bill to appease a potential contributor as he raises money to campaign against the recall. Lopez called that charge absurd, saying there were changes in legal opinions this year.
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E-mail Mark Martin at [email protected]