Lawsuits Over California Ballot Question to Be Heard Together

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SACRAMENTO, Calif. — Just what California voters will see when they evaluate an automobile insurance ballot question will be the subject of a hearing in Superior Court in Sacramento March 12.

A judge will hear testimony on three related cases surrounding ballot language for Proposition 17, which backers say will allow discounts for more drivers and opponents claim will create back-door rate increases. The latest is Attorney General Jerry Brown’s attempt to change the official title and summary to say the measure "will allow insurance companies to increase cost of insurance to drivers who do not have a history of continuous insurance coverage," according to the lawsuit. Due to what Brown’s office argued is its error, the language submitted by the attorney general to the California Secretary of State reads, "may allow insurance companies to increase cost of insurance to drivers who do not qualify for discount."

A primary opponent of the ballot question, the Campaign for Consumer Rights, applauded Brown’s filing. "Jerry Brown is taking his duties seriously. He is giving voters the most accurate information possible to make an informed choice on this deceptive ballot measure," Harvey Rosenfield, the founder of CCR’s affiliate, Consumer Watchdog, said in a statement.

The organization backing the ballot question, Yes on 17 – Californians for Fair Auto Insurance Rates, is opposing Brown’s filing in a bid to keep the approved language. It previously filed a lawsuit against  seeking to force opponents to make changes in their own ballot arguments and ballot rebuttals — included in the voter booklet — saying the argument that the initiative will raise rates is "patently false and misleading" (BestWire, Feb. 26, 2010).

Rosenfield countersued, charging the Yes on 17 campaign of making false and misleading statements. "The law does not allow Mercury to use the official ballot pamphlet to propagate false and misleading statements regarding either the terms of its proposed initiative or the state of existing law," he said in a statement.

"We have the facts on our side, and expect the judge to force opponents to begin telling the truth about Prop. 17," said Kathy Fairbanks, spokeswoman for the Yes on 17 campaign.

Supporters say the proposition would allow insurance companies to lower premiums for drivers who have continuously maintained auto insurance coverage, even if they switch to a different insurer. Under current law, an insurer may offer discounts to policyholders who maintain "continuous" coverage only with their company. Insurers would still be required to base their rates primarily on driving safety record, miles driven annually and driving experience.

According to opponents, because those with lapses in payments may be disqualified from any discounts, the initiative would effectively invalidate a component of Proposition 103 that barred insurance companies from charging customers more for not having had automobile insurance coverage in the past, they maintain. The impact would be disproportionately felt by those who did not need insurance for certain periods — including those without cars for a time, military personnel, students and the temporarily unemployed (BestWire, Jan. 20, 2010).

Mercury General, the state’s third-largest automobile insurer by market share, is the primary funder of the pro-Proposition 17 campaign. Mercury Insurance Co. (NYSE: MCY), a member of Mercury General Group, currently has a Best’s Financial Strength Rating of A+ (Superior).

The top five writers of private passenger auto insurance in California in 2008, according to BestLink, were: Farmers Insurance Group, with a 15.9% market share; State Farm Group, 12.9%; Mercury General Group, 9.4%; Auto Club Enterprises Insurance Group, 9.0%; and Allstate Insurance Group, 8.4%. BestLink provides online access to A.M. Best’s Global Insurance & Banking Database.

Contact the author, Sean P. Carr, Washington Correspondent, at: [email protected]

Consumer Watchdog
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