The opinion of the Mercury News
San Jose Mercury News
OK, voters. Time to fasten your seat belts and get ready for another wild ride, courtesy of two of the deepest sets of pockets in the state: the trial lawyers and the insurance industry.
Get set for tear-jerker stories about the stony hearts of the insurance companies. Prepare for threats of huge premium increases because of those greedy, immoral ambulance chasers also known as attorneys.
Get ready for anything but a calm, reasoned analysis of two referendums on the March 7 ballot: Propositions 30 and 31.
These laws approved in Sacramento last year represent a carefully crafted compromise that makes insurance companies accountable for paying legitimate accident claims in a reasonable amount of time. They do not open the door to frivolous lawsuits. Only insurance companies that force injured Californians into court in order to pursue legitimate claims will be subject to litigation. These laws deserve your support.
The propositions are on the ballot because insurance companies were able to obtain enough signatures to force a referendum, a process by which voters approve or disapprove of a law already on the books.
The laws address “third-party lawsuits,” typically brought by the innocent driver against the insurance company of the at-fault driver after an auto accident. Here’s how it would work:
At-fault Driver plows into Innocent Driver at a stop sign. Innocent Driver asks At-fault Driver’s insurer to pay $45,000 to cover medical costs and damage to the car. The insurer offers $20,000, ignores Innocent Driver’s compromise of $40,000, refuses binding arbitration and deliberately drags out settlement discussions for years.
Innocent Driver finally sues the insurer; the jury decides the insurer actually should have paid the full $45,000. Only at this point — when a jury has decided the insurer was way off base — can a second, or “third-party,” lawsuit be filed against the insurer for acting in bad faith.
With this safeguard, only insurers that act really badly toward an injured party are going to face these second lawsuits.
Californians first gained the right to sue other people’s insurance companies for bad faith under the state Supreme Court’s “Royal Globe” decision in 1979. The court reversed itself in 1988.
The evidence suggests that when injured drivers are allowed to file unlimited bad faith lawsuits against insurance companies, the trial lawyers take advantage of the situation; when they are not allowed to sue, the insurance companies take advantage. Abuses occur either way.
The new laws represent a good effort to achieve fairness without excesses. Insurance companies would have more incentive to act quickly and fairly on claims, rather than delaying or denying payments while an injured person faces bankruptcy over unpaid medical bills.
Proposition 30 represents SB1237, which the Legislature passed last fall and which allows third-party lawsuits in certain cases. Proposition 31 is a trailer bill, AB1309, which significantly narrowed the scope of SB1237 in order to obtain Gov. Davis’ signature.
SB1237 contained a number of provisions that would cull out frivolous suits, and would also steer plaintiffs into binding arbitration instead of courtrooms. AB1309 added more roadblocks to ensure that only the most egregious cases would result in lawsuits. Drunken drivers wouldn’t be allowed to sue, regardless of who was actually at fault. Emotional distress claims would be difficult to pursue.
In their ads and in the Other View at right, the insurers claim that these laws would allow attorneys to file two lawsuits for every claim; we believe the laws contain enough safeguards to make suits rare. They claim drunken drivers would be allowed to sue; we believe this is a red herring with no basis in fact.
Opinions vary on whether Proposition 30 will stay on the books if it passes but Proposition 31 fails; everyone agrees that if Proposition 30 fails but Proposition 31 passes, the entire package is dead.
There is a calm, reasoned analysis available from the Legislative Analyst’s Office at www.lao.ca.gov/initiatives/2000/30_03_2000.html and www.lao.ca.gov/initiatives/2000/31_03_2000.html. But if the insurers and the lawyers wanted voters to rely on the Legislative Analyst to decide the merits of these lawsuits, they wouldn’t be gearing up to spend tens of millions of dollars to fight each other in the media.
The greatest danger to these laws is not the millions the insurers are ready to spend to defeat them. Rather, it’s that by the time voters reach the last two items on a too-long primary ballot, their eyes will glaze over and they will vote “no” without thinking.
If they are thinking, they’ll vote “yes” on Propositions 30 and 31.