California: Suit challenging Prop. 33 ballot language tossed out

A Sacramento judge has thrown out a lawsuit aimed at muzzling consumer criticisms of Proposition 33, a ballot measure that would enable auto insurance companies to impose higher surcharges on previously uninsured motorists in California.

The lawsuit, D’Arelli v. Bowen, was an attempt by proponents of Prop. 33 to delete 6 sentences criticizing the initiative from the ballot pamphlet in November.

The measure’s proponents, funded by Mercury Insurance Chairman George Joseph, argued that statements opposing the initiative are untrue and that Prop. 33’s ballot title and summary prepared by the state Attorney General are “prejudicial and should be changed.”

Opponents of Prop. 33, led by Santa Monica-based Consumer Watchdog, contended that the lawsuit was part of Mercury’s efforts to restrict free speech and to create a “one-sided and frequently deceptive propaganda”.

“They want the Proposition 33 ballot materials to include ‘all the sweet’ – the initiative’s promise of a ‘continuous coverage discount’ – while excluding ‘all the bitter’ – any mention of the negative impact of the measure, especially the corresponding surcharges that would be imposed on those drivers who have not continuously maintained insurance coverage, and the consequences on the broader marketplace,” according to court documents filed by Consumer Watchdog.

On Thursday, Sacramento Superior Court Judge Timothy Frawley ruled against Prop. 33 proponents, thereby allowing the existing ballot title, summary, and pamphlet language to stand.

“I don’t find anything false…I just don’t see it,” Frawley stated. “The quarrel the petitioners have with the argument comes down to a difference of opinion.”

Background on Proposition 33:

Proposition 33 is the second attempt by Mercury Insurance to nullify voter-approved Proposition 103, which prohibits auto insurers from using “the absence of prior automobile coverage, in and of itself” as the determining factor to charge higher premiums or increase surcharges.

Voters enacted the “absence of prior insurance provision” in 1988 because many drivers were being priced out of auto insurance coverage or were being placed in “substandard program solely because they have not previously carried automobile liability insurance.”

Proposition 33 proposes to allow auto insurance companies to grant discounts to drivers who have “maintained continuous coverage”.

However, under California’s “zero-sum” insurance system, discounts given to one group have to be offset by fee increases to another group. This means that Prop. 33 will enable auto insurers to raise surcharges to new drivers and people who have allowed their auto insurance coverage to lapse for more than 90 days.

“Many drivers who face the surcharges (including those who did not previously own a car, and many who had another legitimate reason for not buying insurance) will be unwilling or unable to afford the surcharges,” stated Consumer Watchdog. “This, in turn, will lead to more uninsured motorists on the road – and to corresponding increases in the ‘uninsured motorist’ coverage that many insured motorists buy.”

Proposition 33 title and summary prepared by the California Attorney General: 

CHANGES LAW TO ALLOW AUTO INSURANCE COMPANIES TO SET PRICES BASED ON A DRIVER’S HISTORY OF INSURANCE COVERAGE. INITIATIVE STATUTE. Changes current law to permit insurance companies to set prices based on whether the driver previously carried auto insurance with any insurance company. Allows insurance companies to give proportional discounts to drivers with some prior insurance coverage. Will allow insurance companies to increase cost of insurance to drivers who have not maintained continuous coverage. Treats drivers with lapse as continuously covered if lapse is due to military service or loss of employment, or if lapse is less than 90 days. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Probably no significant fiscal effect on state insurance premium tax revenues.

List of the 6 sentences that Prop. 33 proponents sought to delete from the ballot pamphlet:   

#1 “Proposition 33 unfairly punishes anyone who stopped driving for a good reason but now needs insurance to get back behind the wheel.”

#2 “Proposition 33 raises insurance rates for students completing college who now need to drive to a new job.”

#3 “Proposition 33 raises insurance rates for people who dropped their coverage while recuperating from a serious illness or injury that kept them off the road.”

#4 “Prop. 33 deregulates the insurance industry, making big insurance companies less accountable.”

#5 “No on 33: It leads to more uninsured motorists, costing us all more.”

#6 “Tell this insurance company billionaire it’s not okay to deregulate auto insurance.”

Yes on Proposition 33 financial disclosures (as of July 30, 2012): 

Californians For Real Insurance Reform (Opponents of Prop. 33) financial disclosures (as of July 30, 2012):

  • Contributions Received: $70,616.42 (includes non-monetary contributions)
  • Contributions from Consumer Watchdog & its affiliate: $34,049.60 (excludes non-monetary contributions)
  • Expenditures: $29,037.39


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