Two large political coalitions waging a nationwide war over rising liability insurance costs have begun to focus on a California ballot measure that would limit corporate liability for pain and suffering in personal injury cases.
Proposition 51, known as the Fair Responsibility or "Deep Pockets" Initiative, is expected to lead to millions of dollars of spending by insurance companies and manufacturers supporting it and by trial attorneys and consumer groups opposing it. If California passes the initiative, similar ones can be expected to surface around the nation.
The initiative is designed to resolve a dilemma affecting day care centers, small city governments, even the pony ride at Los Angeles' Griffith Park, all of which are having difficulty finding insurers. Attorneys and consumers groups argue that the insurance companies are exaggerating the impact of a few large judgments to discard unprofitable clients and to raise premiums.
The initiative's supporters appear to have the political advantage. Their coalition includes all of the state's major city and county governments, plus taxpayer, police and education groups and most major insurers. They have collected $1.7 million and plan to push their position in television commercials as the June balloting nears.
"It's going to take a lot of money to fight back against the forces that have come together on this one," said Harry M. Snyder, western regional director for the Consumers Union.
Monterey County Supervisor Barbara Shipnuck defends the proposition as a way to convince insurance companies that they will not be caught with huge, unpredictable damage awards if they insure local governments.
"We don't say this is a total answer," she said, "but at least this way we will be able to assess risk."
The initiative would eliminate a provision in California law -- and that of nearly all other states -- allowing an accident victim to collect all pain-and-suffering damages from a local government or large company when the company is found to have any responsibility for the accident and no one else at fault is able to pay.
Governments and companies could still be required to pay for lost wages and medical expenses and other "actual damages." But "noneconomic" damages, such as emotional trauma and inconvenience, would be split among the responsible parties according to their degree of fault.
The existing provision, which grew out of English common law, is called the "deep pockets" law because it allows plaintiffs to win large damages from any defendant with enough money to pay, even if that defendant had contributed relatively little to the accident.
Proponents of Proposition 51 are peppering the state with short case histories of accidents in which victims largely responsible for their own injuries collected large awards from insurance companies or, in the case of uninsured cities, from the taxpayers.
In the northern California city of Hayward two years ago, according to a Proposition 51 background paper, "a 17-year-old motorcyclist was traveling down a residential street. He was not wearing a helmet, had no Class-4 motorcycle license, had bald tires and was speeding. As he drove across a 'T' intersection, he collided with a car, leaving him with slight brain damage.
"He sued the driver of the car AND the city of Hayward.
"His attorney claimed that his client couldn't see the approaching car because of a pickup and camper parked about four car lengths away from the intersection. He argued that the city should have prohibited parking there and should have installed stop signs.
"The city believed it had no liability and was found to be only 1 percent at fault. The motorcyclist himself was determined to be 80 percent at fault. Even so, the city was forced to pay a structured settlement totaling approximately $2.2 million over the motorcyclist's lifetime. "The city of Hayward is presently unable to get liability insurance."
That case, Hayward risk manager Harry Bruno said, does appear to reveal problems in the insurance system but is not as directly related to Proposition 51 as its supporters imply.
The accident occurred as reported, said Bruno, who favors Proposition 51. The teen-age driver of the car could come up with only $30,000 in insurance protection. And the city, after a court-supervised mediation, agreed to pay almost all the award, at a rate of about $70,000 a year for the first 10 years.
But the city had lost its insurance coverage before the accident, Bruno noted, and only about 10 percent of the damage award would have been considered compensation for pain and suffering under the definition of Proposition 51. If the city had been required to pay only its share of those damages, as the ballot measure directs, the saving to Hayward taxpayers would have been about $2,200.
Joan Claybrook, president of Public Citizen, a consumer organization that has joined a national coalition fighting measures like Proposition 51, said that "in state after state, the insurance industry is using its manufactured 'crisis' to pressure legislatures to enact a series of legal limitations that would make it harder, if not impossible, for innocent victims of chemical contamination, medical malpractice or dangerous products . . . to be fully compensated for medical expenses and other damages."
John Walker, spokesman for the pro-Prop 51 coalition called Taxpayers for Fair Responsibility, called this charge "ridiculous" because the initiative allows victims to dip into corporate or city pockets for lost wages or medical expenses. "People are not going to be thrown into the welfare system because of this initiative," he said.
Opponents, such as Snyder and Claybrook, argue that the insurance industry's financial troubles are caused by low interest on their investments and their competitive pressures, rather than a rash of damage suits. Claybrook predicted that the insurance industry would be pushing for even more restrictions on damage suits within "five minutes" of passing Proposition 51.
Opponents of Proposition 51 cite a Rand Corp. study showing a decline in the number of lawsuits filed per capita in Los Angeles County from 1930 to 1980 to argue that insurance companies do not need protection against suits. (They do not include the study's conclusion that the suits' thrust changed radically, from debt collection in 1930 to personal injury cases, the crux of Proposition 51, in 1980.)
Proposition opponents also argue that limits on pain and suffering awards have been tried in some states, including Kansas and Iowa. "Yet these states continue to face liability insurance crises," a campaign handout said. Walker said such data have to be examined closely and that voters must be reminded that "California is unique: We have more roads and automobiles than anyone."
Snyder said his forces were bothered by the strong support for the initiative from local city councils and county supervisors, including many Democrats who usually support the Consumers Union.
"The manufacturers of products are trying to hide behind the skirts of the cities and counties," he said.