No Fault Motor Vehicle Insurance.
- Requires insurer to pay benefits regardless of who is at fault in most motor vehicle accidents. Suit against another driver prohibited unless specified crime or hazard proven.
- Requires at least $50,000 and up to $1,000,000 vehicle-owner insurance for personal injury protection; optional coverage to $5,000,000. Minimum coverage permitted with waiver of full benefits.
- Generally covers vehicle occupants, pedestrians, bicyclists.
- Requires insurance benefits for medical and rehabilitation costs, wage loss, replacement services, and death. Supplemental optional coverage available.
- Generally requires benefit payment within 30 days or mandates arbitration.
- Incorporates health care fee limits.
The information below was provided by the California Journal.Background: Few issues in the realm of state government have had a longer shelf life, and generated more special-interest attention, than the effort to change the state's civil liability system. Tort reform has been a priority for businesses and local governments since the early 1980s, as the number and scope of lawsuits began a precipitous climb. Many of these suits were brought with the help of attorneys who worked on a contingent-fee basis: If the plaintiff loses, they pay nothing; if they win or settle, the lawyer gets a percentage of the settlement, sometimes as much as a third of the total. Concurrent with the rise in civil suits against businesses and government was a marked increase in auto-insurance rates in the state. Insurance companies claimed these increases were the result of an explosion in the number of auto-accident cases that were winding up in court.
Business and government got some relief in 1986 with voter approval of Proposition 51, which limited plaintiffs' ability to extract huge awards from the "deepest pocket" in a civil case. Less than two years later, the Legislature ratified an agreement that stabilized the escalation in medical malpractice lawsuits. While individual special interests crafted their side-deals in secret, however, the fight over automobile cases was being waged in a noisy and expensive initiative war. In 1988 insurance companies and the state's trial lawyers spent tens of millions of dollars bashing each other and pushing their own wish-list insurance initiatives, among them an industry-backed no-fault proposal. When the dust settled, the one initiative left standing was the one both sides agreed they didn't want--Proposition 103, which proposed strict regulation of the insurance industry and sought to slash auto rates by 20 percent.
Sacramento tort wars then went on hiatus for a few years. The business community, however, was still far from satisfied, and liability costs consistently ranked near the top of the California Business Roundtable's annual survey of concerns. The focus of its anger remained contingent-fee lawyers, whom it believed were targeting it with meritless cases for the sole purpose of extorting a settlement. Meanwhile, another high-profile tort-reform advocate -- the insurance industry -- was making effective use of the tort system to block implementation of Proposition 103. Even though car insurance rates had stabilized, the long-promised rate rollbacks were slow to materialize.
When an unconventional attempt to implement a pay-at-the-pump insurance system died a quiet death in the Legislature, some consumer groups began to take a second look at the concept of no-fault car insurance. Rather than drivers in an accident suing and counter-suing each other in an effort to prove the other's liability, those involved in traffic accidents would simply submit their damage and medical claims to their own insurers. Consumer groups had united in opposition to the insurance companies' 1988 no-fault plan, but some concluded that a properly constructed system could work. Others, like renowned activist Ralph Nader, were adamant in their opposition to any no-fault plan.
The split over no-fault led Proposition 103 spearhead Harvey Rosenfield to part ways with the Voter Revolt consumer group he helped found, and the chain reaction from this fissure has resulted in the three tort-reform initiatives on the March ballot. With no-fault advocates at the helm, Voter Revolt began looking for no-fault supporters, and found one in Andrew Tobias, best known as the author of the popular personal finance software, Managing Your Money. Tobias, who conceived the ill-fated pay-at-the-pump concept, enlisted the help of one of his erstwhile rivals -- Intuit chairman Tom Proulx, co-creator of the even more popular Quicken software. As they shopped the insurance concept, the pair found some interest from their Silicon Valley colleagues, but what the executives really wanted to talk about was the tort system, in particular, the lawsuits being filed against them by shareholders. These so-called "strike suits" generally appeared when company profits dipped precipitously. So, in the interest of getting funding for their initiative, the no-fault advocates decided to pool their efforts with tort-reform backers. Result: The alliance to Revitalize California. Funded largely by loans and contributions from computer giants such as Intel and Seagate, the Alliance drafted, circulated and qualified the three initiatives described below. The feat was accomplished primarily by vilifying the state's trial lawyers and their trade association, the Consumer Attorneys of California. With lawyer-bashing a sport that crosses party lines, the well-funded alliance collected a record number of signatures, while the CAOC failed to qualify a counter-initiative for the March ballot. The alliance then hired a pricey group of political consultants, whose strategy was simple: present all three initiatives as a comprehensive package and peg them to public antipathy toward lawyers.
While the alliance advertises itself as a business-consumer coalition, its supporters weigh heavily toward businesses. Backers include Governor Pete Wilson, an array of business organizations and a large chunk of Republican legislators. In addition to the trial bar, most of the state's better-known consumer advocates oppose the alliance initiatives, including Ralph Nader, Rosenfield and Consumer's Union. As of this writing, the insurance industry had remained neutral on the measures, but the alliance is actively seeking its support and concede it is counting on the industry for significant financial support. Opponents say these overtures to insurers suggest the supporters are less interested in protecting consumers than they are in protecting corporate profits.
Proposal: Proposition 200 is very close to what insurers call "pure no-fault" in the area of personal injury. A driver's insurer would be required to pay the medical, rehabilitation, and replacement costs, as well as lost wages, if that driver is in an accident -- regardless of who is at fault. The company also would have to pay the policy's death benefit to its customer without regard to who is at fault. Insurers would be required to offer personal injury protection (PIP) of from $50,000 to $5 million -- anyone with a policy under $1 million would have to sign a waiver indicating they are aware that their coverage will be limited. In conjunction with the no-fault plan, the initiative also re-institutes a provision requiring that all motorists carry auto insurance. The initiative does not change the method of covering vehicles for property damage. Motorists would be forbidden from suing another driver, either for direct medical costs or for punitive, pain-and-suffering damages. Insurers would be required to offer additional policies of up to $250,000 for those motorists who wish to carry coverage for pain-and-suffering, but these payments also would be distributed by the motorist's own company. In only two instances would lawsuits be allowed: motorists injured by a drunken driver, or by a driver committing a felony. The existing tort system would also still apply to property damage, but only motorists who carry additional collision insurance would be eligible to sue for property damage. The net fiscal impact of the initiative is uncertain, according to the state legislative analyst. If uninsured motorists sign up for the plan, the savings to state and local government could top $100 million. If, on the other hand, uninsured motorists remain uninsured and stop registering their vehicles, these same governments could lose as much as $100 million. The state could save money in reduced insurance and motor vehicle costs, but it could lose tax revenue if premiums go down. About the only thing known for sure is that the measure will cost about $10 million a year to implement.
Arguments for: The listed proponents -- Michael Johnson, Bill Zimmerman, and Bill Westermeyer of Voter Revolt -- are joined in support by Proulx, Tobias, Voter Revolt, Governor Wilson, the Association for California Tort Reform and a sizable contingent of businesses. All say the current tort system for auto accidents is costing insurance ratepayers as much as $2.8 billion a year in unnecessary attorney fees. Supporters say those in serious accidents collect, on average, only 9 percent of their losses, with the rest going to lawyers. By taking attorneys out of the equation, supporters maintain, no-fault will dramatically reduce auto insurance premiums and guarantee customers prompt payment of claims. Uninsured motorists will no longer be a concern, since all motorists will be required to carry insurance, and children and pedestrians will be fully covered. Backers say a similar no-fault law in Michigan has resulted in dramatic reductions in premiums.
Arguments against: Opponents, including the Consumer Attorneys of California, Ralph Nader, Harvey Rosenfield, and a range of labor and health activist groups, say that, far from reducing costs, the history of no-fault is higher cost and inferior coverage. They maintain it is the insurance companies, rather than attorneys, who are artificially padding costs to jack up premiums. By eliminating the ability to define who's at fault in an accident, opponents argue, the initiative forces good drivers to subsidize bad drivers. They say the initiative contains no guarantee that rates will go down, and allows insurers to determine which medical procedures they'll pay for and which they won't. Consumer's Union, which has supported no-fault proposals in the Legislature, says this measure tilts the balance too heavily in favor of the insurance industry.
For additional information please see:
Secretary of State Ballot Pamphlet
Campaign Finance Data from the Secretary of State
California State Senate Office of Research
California League of Women Voters
Easy Reader Voter Guide
Related News Articles
Campaign Web Sites:
- Yes on 200
Alliance to Revitalize California
- No on 200
The Consumer Attorneys of California
The Consumer Network Home Page - Sponsored by The Network Project
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