Insurers Ask Court for Immunity from Lawsuits

A coalition of insurance companies is reportedly attempting to gut consumer protections that will require them to refund potentially tens of millions of dollars to motorists and stop violating state laws.

Safeco Insurance Company has filed an urgent petition with the Court of Appeal in Los Angeles asking it to throw out a citizen group lawsuit – now in Los Angeles Superior Court – that would reportedly force the company to refund potentially millions of dollars in illegal auto insurance surcharges. Farmers Insurance has filed an identical petition.

The companies have asked the appellate court to rule that consumers have no right to sue when an insurance company overcharges them or violates other provisions of insurance reform Proposition 103.

“The insurance companies are asking for a license to steal,” said consumer advocate Harvey Rosenfield, the author of Proposition 103 and a lawyer in the case. “If they can’t be sued for ripping people off, nothing will stop them from doing it. Tens of millions of dollars are at stake here.”

In a response that was to be filed Friday afternoon, the Foundation for Taxpayer and Consumer Rights, which sued Safeco in 2002, asks the Court of Appeal to immediately reject the insurance industry’s latest assault.

In its suit against Safeco, FTCR charges that the company surcharged motorists simply because they were previously uninsured. That is illegal under Proposition 103, which, in order to reduce the number of uninsured motorists, forbids insurers from surcharging or refusing to insure motorists just because they previously did not have insurance. The suit also charges that Safeco failed to disclose its practices to the Insurance Commissioner – a separate violation of the law.

Similar suits are pending against several other insurers, including the Auto Club of S. California, for similar surcharge violations, most of which occurred during the tenure of Commissioner Chuck Quackenbush, who was forced to resign his post in 2000 amid reports that he abused his office to favor insurance companies in exchange for kickbacks.

The unusual appeals filed by Safeco and Farmers mark the third time in as many years that insurance companies have asked the Court of Appeal to judicially repeal a provision of Proposition 103, which allows “any person” to take an insurance company directly to court to challenge violations of its reforms.

Just last year, in two identical cases that drew briefs from many insurance companies, two different judicial panels in the same Court of Appeal issued separate decisions upholding the Proposition 103 authority and rejecting the arguments made by Mercury Insurance and State Farm. By employing the rarely-used “writ review” procedure in the suits against Safeco and Farmers, the insurance industry is reportedly trying to get yet another judicial panel to come to a different decision.

“The voters made clear that consumers could sue insurance companies to force them to obey Proposition 103’s reforms – and to refund illegal surcharges when they break the law. They are trying to win from the Court of Appeal what they lost at the ballot box in 1988 and in the very same court just last year. These endless legal challenges waste taxpayers’ money and undermine public confidence in the integrity of the legal system,” Rosenfield said.

Safeco’s latest legal attack is reportedly but one aspect of the insurance industry’s attempt to evade accountability for ripping off consumers. Insurance companies bitterly fought a rule, proposed by FTCR and issued by the Insurance Commissioner in 2001, ordering insurers not to engage in practices designed to circumvent the anti-surcharge law.

Having lost before the Insurance Commissioner, one of the insurance companies that has been sued for surcharging the previously uninsured, Los Angeles-based Mercury Insurance Company, launched a campaign in Sacramento to legalize such surcharges by repealing Proposition 103’s ban.

After making nearly $1 million in campaign donations to lawmakers, the Legislature passed and Gov. Gray Davis signed Mercury’s bill, which Mercury then reportedly claimed was retroactive.

However, the Constitution forbids legislators from tampering with voter-approved measures, and a Los Angeles Superior Court judge has invalidated the law. Mercury has appealed that decision, and that case also before the Los Angeles Court of Appeal.