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Court Strikes Down California Auto Insurance Surcharge

Thursday, January 15, 2004
Mark Savage – 415-572-0039 (cell)
Michael McCauley – 415-431-6747

Court Rules That State Legislature Violated Voter-Approved Prop. 103

Los Angeles, CA—A Los Angeles Superior Court Judge has ruled that the state legislature violated the California constitution by enacting an auto insurance surcharge for previously uninsured drivers. The court ruled that lawmakers overstepped their authority when they approved SB 841 last year since it ran counter to insurance reforms enacted by California voters when they passed Proposition 103 in 1988.
“We are pleased that the court recognized that this surcharge was a direct violation of the insurance reforms that voters approved when they enacted Proposition 103,” said Mark Savage, Senior Attorney with Consumers Union’s West Coast Regional Office. “The auto insurance surcharge passed by lawmakers last year would have made it even more difficult for many Californians to afford the insurance they are legally required to maintain and resulted in more uninsured drivers on the road.”
Under the law passed by state lawmakers last year, insurance companies were authorized to surcharge previously uninsured motorists applying for insurance for the first time. Drivers who had a lapse in coverage of more than 90 days also would have been subject to the surcharge. This is contrary to provisions of Proposition 103, which vests the authority to create new rating factors to the Insurance Commissioner. The legislature only has the power to amend Proposition 103s provisions by a 2/3 vote and only if the legislation furthers the purpose of Proposition 103. SB 841 did not further the purposes of Proposition 103 since the ballot measure contained a prohibition against determining insurance premiums based upon the absence of prior insurance.
“Voters approved Proposition 103 in order to make insurance more widely available and affordable,” said Reverend Norman S. Johnson Sr., Executive Director of the Southern Christian Leadership Conference of Greater Los Angeles. “This surcharge would have hit low-income Californians the hardest by creating another financial barrier to obtaining insurance.”
The lawsuit challenging SB 841 was filed by a coalition of consumer and civil rights organizations, including Consumers Union, Public Advocates, Southern Christian Leadership Conference, National Council of La Raza and The Foundation for Taxpayer and Consumer Rights.