Associated Press

SACRAMENTO: Gov. Gray Davis vetoed a bill Monday that would have allowed auto insurance companies to use consistency of coverage as a factor in determining rates and premiums.

Under the bill, which was authored by Sen. Don Perata, D-Oakland, auto insurers would have been able to raise the premiums for drivers with lapsed coverage and offer discounts to drivers with continuous coverage.

Consumer advocates strongly opposed the bill on behalf of U.S. soldiers whose premiums would have gone up when they returned from overseas or out-of-state duty.

Opponents said the measure would have added at least $200 a year to the cost of a policy for anyone with gaps in their coverage.

The bill also would have undermined Proposition 103, said Doug Heller, spokesman for The Foundation for Taxpayer and Consumer Rights. The insurance reform initiative, approved by California voters in 1988, requires auto insurers to base prices on a driver’s safety record, years of experience and number of miles driven.

Mercury Insurance, which sponsored the bill, lobbied heavily for the bill’s passage, saying it would have allowed insurance companies to be more competitive by offering discounts to loyal customers.

The company received attention earlier this month when it handed Davis a $25,000 campaign contribution.

“This bill was so ugly that Mercury believed it needed to buy its way into law,” Heller said. “But unlike the legislators who caved into their big donor, Gov. Davis stood by the public and did the right thing.”

George Joseph, chairman and chief executive of Mercury, has denied the accusation and said the company has been active in the Legislature for years.

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On the Net: Read the bill, SB689, at http://www.leginfo.ca.gov