Deukmejian Proposes Package on Insurance : Governor Offers 8 Points That He Says Will Ease Liability ‘Crisis’; Industry, Democrats Doubtful

SACRAMENTO —  In the wake of the voters’ landslide approval of Proposition 51, Gov. George Deukmejian on Tuesday offered an eight-point program to help resolve what he termed “the crisis in liability insurance,” including legislation to make coverage more readily available to local governments.

Deukmejian also proposed barring insurance companies from altering policies issued to local governments before the policies expire, requiring insurance companies to provide more substantive information about their expenses and profits and limiting attorneys’ fees in lawsuits.

A Middle Course

In disclosing his proposals to officials at a conference of the League of California Cities, Deukmejian indicated that he believes he is adopting a middle course between those who believe that the solution to the insurance problem is to come down harder on insurance companies and others who contend that the answer lies in judicial tort reform.

The Republican governor contended that his program “balances private industry’s right to a free marketplace with government’s responsibility to protect the public and provide essential services.”

But Deukmejian’s package was immediately denounced by a spokesman for his reelection opponent, Los Angeles Mayor Tom Bradley, and belittled by the Democratic-controlled Legislature’s most powerful leader, Assembly Speaker Willie Brown (D-San Francisco).

The governor’s most significant proposals will require legislative approval, and it was clear from Brown’s reaction that anything passing the Legislature before the November election is far more likely to have the Democrats’ label on it than Deukmejian’s.

“I am glad to see that the governor finally acknowledges there is a liability insurance problem in California,” Brown said. “The governor’s proposal, however, is empty of any real solutions other than those already under discussion in the Assembly and the Senate.”

Bradley’s deputy press secretary, Deedee Myers, asserted that Deukmejian’s program “looks like it was written by some of those same insurance companies” that have contributed money to his reelection campaign.

On the other hand, the insurance industry, which in the past five years has donated more than $700,000 to Deukmejian’s political kitty, also criticized the governor’s proposals.

‘Seeking Clarification’

“While we are seeking clarification of a number of points, our overall reaction is negative,” declared the Assn. of California Insurance Companies, complaining that the governor is trying to intrude too far into the insurance marketplace and not far enough into the judicial system.

Deukmejian proposed that:

- Insurance companies doing liability business in California form a pool to underwrite coverage for local governments and businesses, such as children’s day-care centers, that cannot obtain coverage through the regular marketplace. If the companies failed to form the pool on their own, the state Insurance Department could step in and force them to participate by creating a Joint Underwriting Assn.

- Insurance companies be prohibited from canceling or changing the price of liability policies issued to local governments before they expire. Individual citizens already have this protection for their personal policies.

- Lawyer fees be reduced to “improve the current imbalance between the compensation paid to plaintiffs and fees paid to their attorneys.” Deukmejian did not suggest a specific fee structure, but he did later tell reporters that it might be modeled after recently enacted fee limits imposed on attorneys in medical malpractice cases. Another element of what Deukmejian called “tort reform” would prohibit a plaintiff from collecting more than once for the same loss.

- Insurance companies be required to provide “more and better information to the state so that we can improve our monitoring of the solvency of the industry and individual companies.”

- The number of state officials who examine insurance rates be increased from nine to 14.

These five points of Deukmejian’s program will require legislative approval. The governor also said he will take the following actions on his own:

- Direct the state Insurance Department to conduct public hearings “to thoroughly investigate high insurance rates.” Insurance companies will be required to justify, in a public forum, any big increase in rates for commercial liability coverage. The first hearing will focus on day-care centers and will be conducted June 25 in Los Angeles.

- Begin an “aggressive information and outreach program” for small businesses and small public agencies to help them “develop new insurance options.”

- Increase, by both the state and insurance companies, “public dissemination of information regarding insurance options so that (individual) consumers can do some comparative shopping.”

Deukmejian called Proposition 51 “a good beginning,” but pointed out that “the crisis in liability insurance is a nationwide problem; we can’t solve it alone.”

Bradley’s Ads Hit

The governor also took a subliminal slap at Bradley and what he has termed the mayor’s “whiny, negative” campaign commercials by attacking the anti-Proposition 51 ads.

“I believe citizens are tired of negative, misleading political ads and low-road, smear campaigns,” Deukmejian said. “By voting for Proposition 51, I believe that many voters were also voting against those who will say anything or do anything to win at the polls. . . . Let’s hope that the bad boys of politics start getting this message.”

The governor’s mention of “the bad boys,” according to a Deukmejian aide, was a reference to B.A.D., the political consulting firm of Carl D’Agostino and Michael Berman that developed the anti-Proposition 51 commercials.

Deukmejian supported Proposition 51, although not aggressively, while Bradley opposed it.

The measure, passed by a whopping 62% of the primary election vote, limits liability for non-economic damages such as pain and suffering to a defendant’s degree of blame in lawsuits with more than one defendant.