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California Proposition 103, Insurance Rates and Regulation (1988)

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California Proposition 103 was on the November 8, 1988 ballot in California as an initiated state statute, where it was approved.

Proposition 103 is said to have "dramatically reshaped insurance regulation in this state by giving an elected insurance commissioner the authority to approve property and casualty rates before they go into effect."[1]

The key reforms in Proposition 103 were to say that three primary factors are to be considered in setting car insurance rates:

  • The driver's safety record
  • The number of miles driven annually
  • The driver's years of experience.
  • Insurers are specifically prohibited under 103 from using the absence of a prior policy as a factor in rate-setting.[1]

Harvey Rosenfield wrote Proposition 103 and continues to work to enforce its provisions. Ralph Nader was a leading endorser and supporter.

Proposition 103 was one of four insurance-related measures on the 1988 ballot in California, and was the only insurance-related proposition the voters approved that year. It bested Proposition 100, Proposition 101 and Proposition 104.

Election results

Proposition 103
ResultVotesPercentage
Approveda Yes 4,844,312 51.13%
No4,630,75248.87%

Details

Proposition 103 required a minimum 20-percent rate reduction from November 8, 1987, levels, for automobile and other property/casualty insurance. It froze rates until November 8, 1989, except for insurance companies "substantially threatened" with insolvency. Thereafter, it required every insurer to offer any eligible person a good-driver policy with a 20% differential. Public hearings and approval by the state's elected Insurance Commissioner is required for rate changes for automobile and other property/casualty insurance. Automobile premiums are required to be determined by driving record. Discrimination, price-fixing, and unfair practices by insurance companies are prohibited. The commissioner is required to provide comparative pricing information. Banks are authorized to engage in insurance activities.

Proposition 103 also established a statewide, elected, position of Insurance Commissioner. It required that the Insurance Commissioner be elected by the voters for four-year terms beginning November 1990.

  • John Garamendi was the first person elected to the post. He was elected in 1990 and served until 1994. He was then re-elected in 2002, serving from 2002-2006.
  • Chuck Quackenbush was elected in 1994 and again in 1998.
  • Steve Poizner was elected in 2006.

2010 ballot proposition

The Mercury General Insurance Corporation sponsored Proposition 17 in 2010 in an effort to alter some of the terms of 1988's Proposition 103.[1]

Proposition 17 was narrowly defeated. A similar proposition, however, has been proposed for the 2012 ballot.[2]

Impact on state insurance rates

According to the Consumer Federation of America, a D.C.-based organization, auto insurance rates in California dropped from the third-costliest in the nation to the 18th after Proposition 103 was approved. Average premiums declined from being 30% higher than the national average to being exactly at the national average.[1]

Fiscal impact

The fiscal estimate provided by the California Legislative Analyst's Office said, "Would increase Department of Insurance administrative costs by $10 to $15 million in first year, varying thereafter with workload, to be paid by additional fees on the insurance industry. State and some local governments would have unknown savings from lower insurance rates. Gross premium tax reduction of approximately $125 million for first three years offset by required premium tax rate adjustment. Thereafter, possible state revenue loss if rate reductions and discounts continue but gross premium tax is not adjusted."

Extensive litigation

December 2009

The California Second District Court of Appeal ruled the last week of December 2009 that consumer groups that successfully challenge insurance rate increases can recoup their legal fees from the insurers.[3]

List of lawsuits

Extensive litigation citing Proposition 103 includes:

  • Fireman's Fund Ins. Co. v. Quackenbush, No. 92-15861. 1996 U.S. App. LEXIS 19493 (9th Cir. 1996).
  • Dudley v. Government Emples. Ins. Co., No. 91-15717. 1993 U.S. App. LEXIS 1703 (9th Cir. 1993).
  • Guaranty Natl. Ins. Co. v. Gates. 916 F.2d 508 (9th Cir. 1990).
  • United States v. Cannabis Cultivators Club. 5 F. Supp. 2d 1086 (N.D. Cal. 1998).
  • Fireman's Fund Ins. Co. v. Garamendi, No. C-91-2854-CAL, No. C-91-2855-CAL. 1992 U.S. Dist. LEXIS 3306 (N.D. Cal. 1992).
  • Fireman's Fund Ins. Co. v. Garamendi. 790 F. Supp. 938 (N.D. Cal. 1992).
  • Proposition 103 Enforcement Project v. Quackenbush, S072613. 1998 Cal. LEXIS 6090 (1998).
  • Quelimane Co. v. Stewart Title Guar. Co.. 19 Cal. 4th 26, 960 P.2d 513, 77 Cal. Rptr. 2d 709 (1998).
  • Professional Eng'rs in California Gov't v. DOT. 15 Cal. 4th 543, 936 P.2d 473, 63 Cal. Rptr. 2d 467 (1997).
  • Amwest Surety Ins. Co. v. Wilson. 11 Cal. 4th 1243, 906 P.2d 1112, 48 Cal. Rptr. 2d 12 (1995).
  • In re Brown. 12 Cal. 4th 205, 906 P.2d 1184, 48 Cal. Rptr. 2d 29 (1995).
  • Manufacturers Life Ins. Co. v. Super. Ct.. 10 Cal. 4th 257, 895 P.2d 56, 41 Cal. Rptr. 2d 220 (1995).
  • 20th Century Ins. Co. v. Garamendi. 8 Cal. 4th 216, 878 P.2d 566, 32 Cal. Rptr. 2d 807 (1994).
  • Gerken v. Fair Political Practices Comm'n. 6 Cal. 4th 707, 863 P.2d 694, 25 Cal. Rptr. 2d 449 (1993).
  • Farmers Ins. Exch. v. Super. Ct.. 2 Cal. 4th 377, 826 P.2d 730, 6 Cal. Rptr. 2d 487 (1992).
  • Raven v. Deukmejian. 52 Cal. 3d 336, 801 P.2d 1077, 276 Cal. Rptr. 326 (1990).
  • Travelers Indem. Co. v. Gillespie. 50 Cal. 3d 82, 785 P.2d 500, 266 Cal. Rptr. 117 (1990).
  • Calfarm Ins. Co. v. Deukmejian. 48 Cal. 3d 805, 771 P.2d 1247, 258 Cal. Rptr. 161 (1989).
  • California Ins. Co. v. Deukmejian, Nos. S007838, S007840, S007841, S007846. 1988 Cal. LEXIS 589 (1988).
  • VPS Management, Inc. v. Pacific Rim Assurance Co.. 71 Cal. App. 427, 83 Cal. Rptr. 2d 772 (1999).
  • Barret v. Dawson. 61 Cal. App. 4th 1048, 71 Cal. Rptr. 2d 899 (1998).
  • Economic Empowerment Found. v. Quackenbush. 65 Cal. App. 4th 1397, 77 Cal. Rptr. 2d 390 (1998).
  • Proposition 103 Enforcement Project v. Quackenbush. 64 Cal. App. 4th 1473, 76 Cal. Rptr. 2d 342 (1998).
  • Americans v. State. 51 Cal. App. 4th 724, 59 Cal. Rptr. 2d 416 (1997).
  • Cates Constr., Inc. v. Talbot Partners. 53 Cal. App. 4th 1420, 62 Cal. Rptr. 2d 548 (1997).
  • County of Alameda v. Pacific Gas & Elec. Co.. 51 Cal. App. 4th 1691, 60 Cal. Rptr. 2d 187 (1997).
  • Fireman's Fund Ins. Cos. v. Quackenbush. 52 Cal. App. 4th 599, 60 Cal. Rptr. 2d 732 (1997).
  • Pala Band of Mission Indians. v. Board of Supervisors of San Diego County. 54 Cal. App. 4th 565, 63 Cal. Rptr. 2d 148 (1997).
  • Yoskioka v. Super. Ct. of Los Angeles County. 58 Cal. App. 4th 972, 68 Cal. Rptr. 2d 553 (1997).
  • Miller v. Super. Ct. of San Francisco County. 50 Cal. App. 4th 1665, 58 Cal. Rptr. 2d 584 (1996).
  • Pacific Mut. Life Ins. Co. v. State Bd. of Equalization. 41 Cal. App. 4th 1153, 49 Cal. Rptr. 2d 99 (1996).
  • RLI Ins. Co. Group v. Super. Ct. of San Francisco County. 51 Cal. App. 4th 415, 59 Cal. Rptr. 2d 111 (1996).
  • State Farm Fire & Cas. Co. v. Super. Ct. of California for Los Angeles. 45 Cal. App. 4th 1093, 53 Cal. Rptr. 2d 229 (1996).
  • Wilson v. Fair Employment & Hous. Comm'n. 46 Cal. App. 4th 1213, 54 Cal. Rptr. 2d 419 (1996).
  • Wolfe v. State Farm Fire & Cas. Ins. Co.. 46 Cal. App. 4th 554, 53 Cal. Rptr. 2d 878 (1996).
  • Schimmel v. NORCAL Mut. Ins. Co.. 39 Cal. App. 4th 1282, 46 Cal. Rptr. 2d 401 (1995).
  • Schmidt v. Foundation Health. 35 Cal. App. 4th 1702, 42 Cal. Rptr. 2d 172 (1995).
  • Manufacturers Life Ins. Co. v. Super. Ct.. 32 Cal. App. 4th 821, 33 Cal. Rptr. 2d 424 (1994).
  • Manufacturers Life Ins. Co. v. Super. Ct. of San Francisco. 23 Cal. App. 4th 1629 (1994).
  • Amwest Sur. Ins. Co. v. Wilson. 40 Cal. App. 4th 225, 25 Cal. Rptr. 2d 611 (1993).
  • Barnes v. State Farm Mut. Auto. Ins. Co.. 16 Cal. App. 4th 365, 20 Cal. Rptr. 2d 87 (1993).
  • Sequoia Ins. Co. v. Super. Ct.. 13 Cal. App. 4th 1472, 16 Cal. Rptr. 2d 888 (1993).
  • State Compension Ins. Fund v. State Bd. of Equalization. 14 Cal. App. 4th 1295, 18 Cal. Rptr. 2d 526 (1993).
  • Allstate Ins. Co. v. Gillespie, No. B050439. 1992 Cal. App. LEXIS 194 (1992).
  • Safeco Ins. Co. v. Garamendi. 27 Cal. App. 4th 400, 14 Cal. Rptr. 2d 621 (1992).
  • Wilshire Ins. Co. v. Garamendi. 5 Cal. App. 4th 1573, 8 Cal. Rptr. 2d 55 (1992).
  • California Auto. v. Garamendi. 232 Cal. App. 3d 904, 283 Cal. Rptr. 562 (1991).
  • California Auto. v. Garamendi. 234 Cal. App. 3d 1486, 286 Cal. Rptr. 257 (1991).
  • California Auto. Assigned Risk Plan v. Gillespie. 23 Cal. App. 4th 975, 280 Cal. Rptr. 217 (1991).
  • National Indem. Co. v. Garamendi. 233 Cal. App. 3d 392, 284 Cal. Rptr. 278 (1991).
  • Sanford v. Garamendi. 233 Cal. App. 3d 1109, 284 Cal. Rptr. 897 (1991).
  • AIU Ins. Co. v. Gillespie. 222 Cal. App. 3d 1155, 272 Cal. Rptr. 334 (1990).
  • Allstate Ins. Co. v. Gillespie. 225 Cal. App. 3d 798, 275 Cal. Rptr. 525 (1990).
  • Dairyland Ins. Co. v. Gillespie. 223 Cal. App. 3d 1229, 273 Cal. Rptr. 80 (1990).
  • Maler v. Super. Ct. of Los Angeles City. 220 Cal. App. 3d 1592, 270 Cal. Rptr. 222 (1990).
  • Beatty v. State Farm Mut. Auto. Ins. Co.. 213 Cal. App. 3d 379, 262 Cal. Rptr. 79 (1989).
  • Kennedy Wholesale, Inc. v. Board of Equalization. 227 Cal. App. 3d 228, 265 Cal. Rptr. 195 (1989).
  • Kincaid v. Mangum. 189 W. Va. 404, 432 S.E.2d 74 (1993).
  • State Farm Mut. Auto. Ins. Co. v. State. 124 N.J. 32, 590 A.2d 191 (1991).

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