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California Appeals Court: insurers must give good drivers a break

Wednesday, August 16, 2006

California Appeals Court Denies Insurers Attempt to Suspend
New State Regulations That Benefit Good Drivers

Auto Insurers Must Begin Complying With New Rules Starting August 17

SACRAMENTO, CA — A state appeals court in Sacramento today rejected an attempt by insurers to block new state auto insurance regulations that benefit good drivers throughout the state. The new rules require insurers to begin basing auto insurance premiums primarily on policyholders’ driving records rather than their ZIP code, marital status, or other factors.
The Court of Appeal’s decision in American Insurance Association et al v. Garamendi et al keeps in place a state Superior Court decision that denied the industry’s motion for a preliminary injunction, which would have suspended implementation of the regulations while insurers sue to try to overturn them.
“Today’s ruling means that good drivers in California will finally begin getting the insurance premium breaks they deserve,” said Mark Savage, Senior Attorney for Consumers Union. “Insurance companies may choose to stubbornly pursue their lawsuit, but in the meantime they’ll have to start following the law.”
Consumers Union and a coalition of consumer and civil rights organizations and three cities petitioned Insurance Commissioner Garamendi in 2003 to make the rule change in keeping with Proposition 103. After conducting three years of field hearings on the issue, Garamendi concluded that auto premiums based primarily on ZIP code were unfair and irrational and that insurers had manipulated their own data calculations to make the claim that rural drivers would see massive premium increases under the proposed regulations.
In July, the state formally adopted new regulations developed by Garamendi that require insurers to base premiums primarily on one’s driving safety record, annual mileage, and years of driving experience. But insurance trade associations soon filed suit to block them. Two of the state’s biggest auto insurers — the Auto Club of Southern California and USAA – have announced that they will follow the new state regulations and cut premiums for most of their policyholders.
Over the course of Commissioner Garamendi’s three years of public hearings, Consumers Union presented numerous reports documenting that ZIP-code based rates hurt good drivers throughout the state and that these rates are not cost-based. Consumers Union also found that insurers are charging good drivers in some small rural communities far more than good drivers living in some suburban and urban communities.
The original petition in support of the new regulations was filed by Consumers Union, The Foundation for Taxpayer and Consumer Rights, the National Council of La Raza, the Southern Christian Leadership Conference of Greater Los Angeles, Spanish Speaking Citizens’ Foundation, Public Advocates, and City Attorney John Russo for Oakland, City Attorney Dennis Herrera for San Francisco, and City Attorney Rocky Delgadillo for Los Angeles.
For more information on this issue, including research by Consumers Union showing how ZIP code-based rates hurt good drivers throughout the state, see:
Mark Savage: 415-431-6747