Fifteen Year Battle for Fair Insurance Rates Comes Down to One Decision

Sacramento–California state legislators, including members of the Latino Caucus, announced their submission of “friend of the court” letters to the California Supreme Court in which they urged review of Department of Insurance regulations that allow insurers to base premiums on where a driver lives rather than their driving record. Proposition 103, enacted in 1988, requires rates to be based on driving record. The case is Spanish Speaking Citizens’ Foundation, et al v. Chuck Quackenbush.

Consumer groups, city and county governments and the legislators are asking the court to review the regulations to determine if they are in compliance with the mandate of Proposition 103.

“The Supreme Court has before it the opportunity to resolve a fifteen year old battle for consumer and civil rights,” said Douglas Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights (FTCR). “In 1985, civil rights groups challenged the unfair practices of insurance companies. People of color in California should be, and are, outraged that discriminatory regulations are still in effect. The Supreme Court is needed to finally provide justice.”

While all motorists suffer from territorial rating, this pernicious practice particularly harms residents of urban areas. According to California Department of Insurance data as well as insurance company data and commercial brokers, territorial rating results in dramatically differing premiums for people living in different zip codes (see attached premium comparisons). Retaining the Quackenbush regulations means that good drivers, in particular, will continue to pay overpriced insurance premiums.

In 1987, the California Supreme Court concluded the civil rights case, known as King v. Meese, which was filed in 1985 against the state’s mandatory insurance law. Justice Broussard wrote:

Rates which took affordability into account, and weighted driving record more than residence, would go far to alleviate the problem caused by the financial responsibility law. [King v. Meese (1987) 43 Cal.3d 1217– conc. opn., Broussard, J.,emphasis added]

The Court, however, told the community and civil rights groups that “their case should be made to the Legislature, not to this court.”

This advice was followed. One year later, after the Legislature failed to enact insurance reforms, California voters passed Proposition 103. That measure was aimed at overhauling insurance industry practices in California and providing greater protections for policyholders. Cal. Ins. Code § 1861.02(a) was a central focus of the initiative and of the contentious campaign waged against it by the insurance industry. Thirteen years later, the mandate of § 1861.02(a) remains unenforced, and one of Proposition 103‘s express purposes — “to protect consumers from arbitrary insurance rates and practices”–remains unfulfilled.

“The fight against discriminatory insurance practices started in the California Supreme Court, when the Court directed the public to change state law to protect consumers against territorial rating. Californians passed Proposition 103 in 1988. Now, after twelve years in which insurers have ignored the law, it is time the Supreme Court resolve this battle. The implications of this case go beyond the savings to good drivers; they ask the question: can the Insurance Commissioner ignore the will of the voters?” said Heller.

Several citizens’ groups challenged the Quackenbush regulations as violating voter-enacted Prop 103 and won in Alameda County Superior Court in 1998. The insurers and Mr. Quackenbush appealed. In December 2000, the Court of Appeal reversed the lower court’s decision, upholding the Quackenbush regulations. Consumer groups have now petitioned to the California Supreme Court for review. The Supreme Court will have until May 2001 to decide whether to take the case.

In addition to the legislators, Supreme Court review of the regulations is supported by the cities and counties of Los Angeles, San Francisco and Oakland as well as an array of consumer and minority organizations, including:

The Foundation for Taxpayer and Consumer Rights, Consumers Union, Community Reinvestment Committee, Congress of California Seniors, Consumer Action, Economic Empowerment Foundation, Employment Law Center, Legal Aid Society of San Francisco, Allan Hammond, Impact Fund, Legal Aid Foundation of Los Angeles, Mexican American Legal Defense and Education Fund, National Council of La Raza, Angela Oh, Public Counsel Law Center, San Francisco La Raza Lawyers Association.