Court Ruling Would Maintain Good Driver Protections Adopted by Insurance Commissioner Garamendi

Santa Monica, CA — Auto insurers must comply with new rules adopted by Insurance Commissioner Garamendi and approved by Governor Schwarzenegger’s Office of Administrative Law last month, according to a tentative ruling issued today by a Sacramento Superior Court judge. The court will hear oral arguments tomorrow afternoon when it is expected to finalize its ruling. Insurance companies filed a lawsuit to block the regulations, which implement 1988’s Proposition 103 requirement that insurers base auto insurance premiums on a motorist’s driving record rather than where he or she lives. Garamendi issued these rules after three years of public hearings and study in response to a petition by consumer and community groups.

According to the tentative decision: “The motions for preliminary injunction are denied since Plaintiffs have not persuaded the Court that they have a reasonable likelihood of success on the merits.”

Consumer advocates say that by forcing insurers to comply with the new regulations, this ruling will protect good drivers throughout California who have been overcharged due to the unfair ZIP code rating scheme allowed under the old rules, which were developed by disgraced former Insurance Commissioner Chuck Quackenbush.

“Voters decided this issue almost 18 years ago, but some recalcitrant insurance companies have used every resource at their disposal to block reform,” said Harvey Rosenfield, the author of Proposition 103. “While some insurers will continue this last-ditch legal effort to throw reform off the tracks, the court’s expected ruling will keep reform moving, forcing insurers to play by the rules and judge drivers by their record, not their ZIP code.”

Although the insurers’ lawsuit asking the Court to block Garamendi’s rules claims that the rules could not be implemented fairly, some insurance companies have already filed rating plans with the Department of Insurance that comply with the new rules. In July, Auto Club of Southern California adopted a new pricing formula and today USAA announced it was complying with the new rules. In both instances, the companies announced that the vast majority of their customers would also see rate decreases.

“Some insurance companies have decided that it is better to adjust to reform and provide price breaks to their customers, while other companies keep digging their feet in the mud in order to protect the status quo in which good drivers pay too much for auto insurance,” said Douglas Heller, Executive Director of The Foundation for Taxpayer and Consumer Rights, one of the groups that petitioned Garamendi for the reforms. “Fortunately, the new rules require that all companies use the fairer system, whether the insurers like it or not.”

Insurers are required to file reformed pricing plans with the Department of Insurance by Monday August 14, 2006.

Contact Douglas Heller for a copy of the Tentative Ruling.

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