THE QUESTIONShould the 1999 law that allowed individuals and businesses to sue another party's insurance company for unfair handling of liability claims be approved? THE SITUATIONUnder current law, an insurance company must handle claims from a policyholder in a fair manner. If an insurance company unfairly handles a claim, the policyholder has two ways to respond: file a complaint with the Department of Insurance and/or sue his or her insurance company in civil court, which is called a "first party" action. Current law limits an injured "third party" to filing a complaint with the Department of Insurance for an investigation into the unfair handling of a claim. Third-party lawsuits had been possible in California during the 1980s. In March 1979, the California Supreme Court ruled that a third party could sue an insurance company for unfair claims practices (Royal Globe Insurance Company vs. Superior Court). In August 1988, though, the Supreme Court overturned its decision. In 1999, SB 1237 (Chapter 720) and AB 1309 (Chapter 721) were signed into law. These laws allow third-party claimants to sue insurance companies under certain conditions, and would have gone into effect January 1, 2000. However, once Propositions 30 and 31 qualified for the Primary ballot, the laws were put "on hold" until the outcome of the March election. THE PROPOSALProposition 30 would put into effect the provisions of SB 1237, allowing an individual or business to file a third-party lawsuit against an insurance company for unfair practices in handling liability claims. Liability insurance generally provides compensation for bodily harm, wrongful death, and economic loss. A lawsuit could be filed only if the third party: · was not driving under the influence of alcohol or drugs at the time of the accident that caused injury · sends a written final request to the insurance company to settle the claim for an amount within the insurance policy limits · is awarded an amount larger than the final written request. 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 involved party can request arbitration, but both sides must agree before the case goes to arbitration. If a case goes to arbitration, the third-party claimant cannot sue the company. An arbitration award cannot exceed policy limits or include damages not covered by the policy. FISCAL EFFECTThe Legislative Analyst says that this proposition would likely increase liability insurance costs in California. 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, so any increase in insurance premiums would increase state revenue from this tax. SUPPORTERS SAY· Proposition 30 prohibits drunk drivers from suing and does not give uninsured motorists the right to sue you. It requires a drunk driver's insurance company to pay your claim on time. · Proposition 30 will reduce lawsuits in California: If an insurance company agrees to resolve your claim through arbitration or simply decides to treat your valid claim fairly, there is no lawsuit. OPPONENTS SAY· Proposition 30 is a trick to allow two lawsuits for the same accident. This means billions in higher lawyer fees and dramatically higher insurance premiums for all Californians. · Under current law, if someone thinks a settlement offer is too low they can already take the dispute to court. They can also file a complaint with the state Department of Insurance. For more information: Supporters: (916) 491-4691, www.yes30.org (Analysis prepared by the League of Women Voters of California Education Fund  
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