Calif. Judge Rules Against Auto Insurers in Lawsuit over ZIP Codes

Siding with consumer groups and state regulators, a state judge on Feb. 15 threw out a lawsuit that challenged rules requiring auto insurers to base their rates primarily on drivers’ records instead of where they live.

Superior Court Judge Loren McMaster granted a summary judgment, ruling that regulations adopted last year by John Garamendi, insurance commissioner at the time, were consistent with a rate-regulation initiative adopted by voters in 1988.

“The regulations simply track the language of (the initiative), which requires that driving safety record, annual mileage and years of driving experience shall have the greatest weight and importance in determining one’s automobile premium,” McMaster wrote.

Garamendi’s regulations replaced rules adopted in 1996 that allowed the ZIP code where a driver’s vehicle is registered to have more weight in determining rates than the motorist’s driving record.

Three insurance groups – the American Insurance Association, the Association of California Insurance Companies and the Personal Insurance Federation of California – sued, contending that a driver’s residence is essential in determining risks and insurance costs.

Ken Gibson, a vice president of the American Insurance Association, predicted the new regulations would result in higher rates for some Californians.

“Once implemented, these regulations will force rural and suburban drivers to subsidize urban drivers that present a higher risk,” he said in a statement.

But consumer groups argued that the old rules could have penalized good drivers.

“California’s new auto insurance regulations are fair and will benefit good drivers throughout the state,” said Mark Savage, senior attorney for Consumers Union, one of the groups that supported the new rules. “Good drivers will get a break on their premiums and will be protected from discrimination based on their ZIP code.”