Will an insurance company buy Democrats’ souls?

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Jamie Court is executive director of the Santa Monica-based
Foundation for Taxpayer and Consumer Rights.


The last days of the legislative session are notorious for eleventh-hour backroom deals and greased lightning legislation
that can clear every rules hurdle in mere hours. But even by
these standards, this year’s shenanigans have all the makings
of the final test for the souls of the Democratic leaders.

They are quietly engaging in class warfare on behalf of cash-rich special interests whom the politicians seem to believe have more to do with the party’s control of the Capitol than Democrats’ traditional allegiance to the poor.

State Sen. Don Perata, D-Oakland, is a case in point. He rose
from local to statewide leadership with populist pledges of
protecting average folks from special interests. But the
self-professed, life-long progressive authored two eleventh-hour
bills targeting the poor, in a recession, on behalf of corporations
that contributed generously to his campaign around the time the
last-minute legislation was hatched.

Perata’s predatory lending legislation would have prevented
local governments from passing stronger protections for seniors
scammed out of their home equity. A consumer backlash forced
him to withdraw the bill this week.

The more insidious Perata end-of-the-session special, on the
fast track to pass, allows insurers to surcharge previously
uninsured motorists — in violation of voter approved Proposition
103, the state insurance commissioner’s authority and court
rulings. Perata’s SB689 targets those who have gone without
insurance or who have let their insurance lapse for more than 90
days — primarily low-income people who, for a variety of reasons
(unemployment, medical emergency, etc.) cannot afford to pay
their automobile insurance premiums.

Perata’s logic: Surcharging the poor for not having insurance is
less important than insurers’ word of honor about giving a
discount to middle-class consumers. Unfortunately, SB689
guarantees no savings for any driver and will likely lead to higher
premiums for all, because more motorists will stay uninsured,
resulting in higher premiums for the “uninsured motorist”
coverage that drivers buy to protect from being hit by an uninsured driver.

The real motive behind SB689 is campaign cash, and Perata is
not the only taker. The bill’s sponsor, Mercury Insurance, led by
CEO George Joseph, has contributed $1,077,550 to state
lawmakers and candidates since 2000, when it first began its
assault on Section 1861.02(c) of the Insurance Code. That law
forbids insurance companies from surcharging motorists who
are buying insurance for the first time or have a lapse in coverage. Mercury and other insurers are being sued for systematically violating this law, enacted through Proposition 103, and the insurance commissioner has issued new rules to prevent insurers from future violations.

To buy its way out of trouble, Mercury has donated to 25 state
senators and 56 assembly members — two-thirds of the
California Legislature. (Not coincidentally, the bill needs a two-thirds supermajority to pass.)

Forty-five Democrats and 36 Republicans were recipients of
Mercury‘s largesse. Sen. Perata himself got $25,000 on June 14,
just six days before the first failed effort to push the bill through
the Senate insurance committee. That bill was defeated after the
insurance commissioner’s office testified that the bill had no
actuarial validity.

Desperate, Mercury/Perata have now rushed another bill before
the Assembly. SB689 appears to have the Democratic Party
leaders’ blessing. With rule waivers, it sailed through an impromptu Assembly insurance committee hearing Monday
night (convened conveniently after reporters’ deadlines). Former insurance commissioner candidate and committee chair Tom
Calderon, D- Montebello, received $174,000 from Mercury.
Hoping for a signature on the bill, Mercury has given Gov. Gray Davis $102,500.

Mercury also contributed $150,000 to a failed initiative to extend
term limits. Now that term limits are set in stone, Democratic
leaders should remember that all they have left is their souls.

Can one insurance company buy the soul of the Democratic
Party? The jury is out, but the signs are that the only class many
Democratic leaders care about is their own. There’s still hope
that principle will prevail in the often more enlightened state Senate.

It’s hard to argue with politicians about legislative ethics, but they
should know that engaging in the strategy of class warfare is a
slippery slope.

Trading away allegiance to the poor for campaign cash is a
Faustian bargain that has no winners. How can the donkeys
complain about the elephants when they big-foot the little guy, too?

Senate Democrats with the power to stop SB689 should
remember their predecessors, notably Phil Burton, heroic
defender of the poor. Biographer John Jacobs wrote of that San
Francisco leader: “He saw the world as his jurisdiction and
never forgot whom he cared about or why he was in politics.
Burton was completely secure about what drove him — a visceral
rage for justice.”


The above op-ed ran in The San Francisco Chronicle on 8/29/02.

Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
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