Yes on Props. 30 and 31

Propositions 30 and 31 ask voters to ratify or reject laws passed by the Legislature last year allowing motorists involved in accidents with negligent drivers to sue, under limited circumstances, the insurance companies of those drivers. Large out-of-state insurance companies and several groups financed by the insurers want the voters to overturn the law by saying no to both propositions. Californians should, however, vote yes on Propositions 30 and 31 to bring about a fair and modest reform.

The purpose of the original legislation is to help motorists injured by “at fault” drivers recover just and timely damages from the insurers of those drivers. Such third-party lawsuits were allowed throughout most of the 1980s but were banned by state courts on procedural grounds in 1988. Today, if you are hit by a driver running a red light while ordering pizza on his cell phone, the driver’s insurance company may, and often does, deny your claim or sit on it as long as it wants. You can sue the other driver personally, but that delays compensation for years.

The new law--the Fair Insurance Responsibility Act of 2000--gives a rather restricted right to file a so-called third-party lawsuit against a recalcitrant insurance company for bad faith. The limits include a right for either party to demand arbitration. By declining to arbitrate if the company wanted it, the motorist would forfeit the right to sue.

This is not what State Farm, Allstate, Fireman’s Fund and some other insurance companies--all headquartered in other states or in Europe--would like Californians to believe. In a multimillion-dollar advertising blitz, they portray the law as a bonanza for money-grubbing trial lawyers and drunk and uninsured drivers. They claim insurance premiums for law-abiding motorists would go up by as much as $300 as a result and lawsuits would multiply. The law, they contend, all but invites fraudulent claims. The insurers, who put the measure on the ballot, are also counting on voters’ natural tendency to vote no on propositions, especially complex ones.

There are shreds of truth in the insurance company arguments, but they are hidden by the TV ads’ brazen distortions. As California’s Department of Justice has clearly said, the law “does not authorize or permit drunk drivers to file lawsuits against insurance companies for engaging in unfair claim settlement practices.” Under California law, uninsured drivers cannot sue for pain and suffering, and Propositions 30 and 31 do not change that.

Lawsuits would increase only if insurance companies failed to act in good faith in processing claims. This legislation is geared toward avoiding lawsuits, and it’s up to the insurance companies whether or not to litigate. It is also untrue that the law itself, regardless of any impact on accident claims, would jack up rates. Current California law, in fact, prohibits that.

Claims and premiums went up in the 1980s, the last time that third-party lawsuits were allowed. But the new Fair Insurance Responsibility Act is far more limited, with a score of restrictions written in by the insurance companies themselves. There is nothing in the act that would encourage fraud. On the contrary, submitting claims to the scrutiny of independent adjudicators may well reduce the number of fraudulent claims paid.

As California Deputy Atty. Gen. Gregory Gonot put it, all that the new law does is “require that an insurer . . . must act in good faith and deal fairly with third-party claimants.” It accomplishes that without putting an onerous burden on the insurance companies. Propositions 30 and 31 deserve yes votes.