THE QUESTION Should the 1999 law that allowed individuals and businesses to sue another party's insurance company for unfair handling of liability claims be approved? PROVISIONS If approved, this proposition would allow provisions of SB 1237 to go into effect. SB 1237 gives third-party claimants the right to sue an insurance company for unfair claim practices in certain liability cases. SB 1237 also creates an alternative, binding arbitration system for settling these liability cases. This proposition allows an individual or a business to file a third-party lawsuit against an insurance company for unfair claims practices in handling liability claims. Liability insurance generally provides compensation for bodily harm, wrongful death, and economic loss. A third-party lawsuit could only be filed if:
If the lawsuit goes forward, the third-party claimant needs to prove in court that an insurance company unfairly handled the claim. If the third party wins the lawsuit, the claimant could receive an amount higher than the insurance policy limits. This proposition also creates a binding arbitration system to settle certain disputed underlying claims. Either a third-party claimant or an insurance company can request arbitration, but both sides must agree to arbitration for the case to be resolved there. If a case goes to arbitration, the third-party claimant cannot sue the company. In all cases, an arbitration award cannot exceed policy limits or include damages not covered by the policy. BACKGROUND See section Background for Proposition 30 and 31. FISCAL EFFECT This proposition would likely increase liability insurance costs in California. This is because when insurance companies settle or arbitrate claims for somewhat higher amounts to avoid third-party lawsuits, they will incur greater costs. The state currently taxes insurance companies on the basis of gross premiums, currently at a rate of 2.35 percent. Any increase in insurance premiums would increase state revenue from this tax. Since this measure's net impact on court cases cannot be determined, the overall fiscal effect on state court costs is unknown. IMPACT OF YES OR NO VOTE A YES vote means the law allowing an individual or business to sue another individual's or business's insurance company for unfair claims handling would go into effect. A NO vote means an individual or business could not sue another individual's or business's insurance company for unfair claims handling. SUPPORTERS SAY
OPPONENTS SAY
SUPPORTERS AND OPPONENTS The official ballot arguments in support are signed by Senator Martha Escutia; Kay McVay, RN, President, California Nurses Association; and Lois Wellington, President, Congress of California Seniors. Other supporters mentioned in the official ballot arguments include Consumers Union, Consumer Federation, Ralph Nader, and Candace Lightner, Founder of Mothers Against Drunk Driving. The official ballot arguments in opposition are signed by Rebecca M. Bearden, Chairperson, California Public Policy Committee, Mothers Against Drunk Driving; Larry McCarthy, President, California Taxpayers' Association; Shirley Knight, Deputy State Director, National Federation of Independent Business; Michael Johnson, Executive Director, Voter Revolt; and Jim Conran, President, Consumers First. Other opponents mentioned in the ballot arguments include California Organization of Police and Sheriffs and Marian Bergeson, Member, State Board of Education. For more information: Supporters: Consumers and Their Attorneys, 916-491-4691, www.yes30.org Opponents: Consumers Against Fraud and Higher Insurance Costs, 800-952-0530 email info@cafhic.org, www.NO30and31.org
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