California Proposition 104, No-Fault Automobile Insurance (1988)

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California Proposition 104 was on the November 8, 1988 statewide ballot in California as an initiated state statute where it was defeated.
  • Yes: 2,391,287 (25.42%)
  • No: 7,015,325 (74.58%)

Proposition 104, if it had passed, would have established a "no-fault" motor vehicle insurance system that would have:

  • Paid benefits up to specified limits to an accident victim who suffers bodily injury.
  • Permitted individuals to sue for losses which exceed those limits.
  • Limited noneconomic losses (such as "pain and suffering") and attorney contingency fees.
  • Required a two-year reduction in certain motor vehicle insurance rates.
  • Permitted, but not required, insurance companies to offer an unspecified "good driver" discount.
  • Enacted other insurance-related provisions.

Proposition 104 was supported by a variety of Democratic politicians, including Dianne Feinstein. It was opposed by Ralph Nader.

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

Ballot summary

The official ballot summary said, "Establishes no-fault insurance for automobile accident injuries, covering medical expenses, lost wages, funeral expenses. Accident victim may recover from responsible party only for injuries beyond no-fault limits. Prohibits recovery for noneconomic injuries except cases of serious and permanent injuries and specified crimes. Reduces rates for certain coverages 20 percent for two years. Cancels Propositions 100, 101, 103. Restricts future insurance regulation legislation. Requires arbitration of disputes over insurers' claims practices, limits damage awards against insurers. Prohibits agents and brokers from discounting. Increases Insurance Commissioner's power to prosecute fraudulent claims. Limits plaintiffs' attorney contingency fees in motor vehicle accident cases."

Fiscal impact

The fiscal estimate provided by the California Legislative Analyst's Office said:

Costs

Department of Insurance. This measure would increase the Department of Insurance's administrative costs by about $2.5 million during 1988-89. In years following, these costs could be somewhat lower or higher, depending on workload. These costs, payable from the Insurance Fund, may require additional fees and assessments to be levied on the insurance industry.

State and Local Governments. While some local governments purchase insurance, most "self-insure" by relying upon their own resources to pay for losses and claims resulting from motor vehicle accidents. Because this measure reduces certain types of motor vehicle insurance rates and limits claims for noneconomic losses, it would result in unknown savings to the state and the affected local governments.

Recovery of Workers' Compensation Costs. This measure restricts the ability of employers to be reimbursed for medical expenses and wage losses paid under workers' compensation and other similar programs in motor vehicle accident cases. State and local governments, as employers, would experience both costs and savings from this restriction. The net effect is unknown.

Courts. Because this initiative places limits on court actions for noneconomic damage claims, it may reduce, to an unknown extent, annual state and local court costs and local court revenues.

Revenues

Insurance companies pay a tax based on the amount of gross premiums they receive each year from insurance sold in California. These tax revenues are deposited in the State General Fund.

This measure requires rates for bodily injury, uninsured motorist, and medical liability coverage to be reduced for a two-year period. These three components account for over 40 percent of total motor vehicle insurance premiums. The required rate reductions -- by themselves -- would reduce state insurance tax revenues by about $25 million a year. This estimate assumes that no offsetting adjustments would be made in other insurance rates -- not restricted by this measure -- to compensate for these reductions. Whether such adjustments would occur is unknown.

The rate reductions required by this measure would expire after two years, at the end of June 1991.

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