'Pay at the pump' auto insurance bill gets sent into legislative limbo.

The California Senate, after being heavily lobbied by insurance companies and trial lawyers, has sent an ambitious "pay-at-the-pump" auto insurance plan to the Judiciary Committee, where similar no-fault bills have been killed for 20 years.

Senate Bill 684, sponsored by Sen. Art Torres, D-Los Angeles, who has declared the bill effectively "dead," would raise an estimated $8 billion per year by increasing the gasoline tax by 15 to 40 cents per gallon, hiking some vehicle registration fees and imposing licensing surcharges.

Senate President Pro Tempore David A. Roberti, D-Van Nuys, told fellow senators in mid-March that he wanted the bill sent to the Judiciary Committee, which has traditionally dealt with matters of personal injury and property damage.

Under SB 684, which supporters claim would save California drivers up to $6.4 billion in annual premiums, bad drivers would bear the brunt of those higher fees and surcharges. Meanwhile, good drivers would receive a break.

The $8 billion raised by provisions of SB 684 would go toward paying for no-fault insurance coverage for all drivers statewide.

At the heart of SB 684, which provides insurance for all drivers, is a provision that all auto insurance claims be settled out of court. The full state Senate originally was expected to vote on the bill before the end of April, said Alan Gordon, staff counsel for Sen. Torres. But now the bill may never make it to the Senate floor.

"If it passes, California drivers will collectively save 25 to 40 percent of the $12 billion they pay out each year for car insurance premiums," Gordon said.

Insurance companies challenge Torres' claims and said, based on the information given to the public so far, the plan would not be feasible unless the per-gallon tax is much higher than 40 cents. To fly, the plan would have to hike the gas tax by as much as $1 a gallon, they said.

SB 684 is particularly important to East Los Angeles, which is part of Torres' district, where 50 percent of drivers have no car insurance, Gordon said. By comparison, only 25 percent of drivers throughout California have no insurance, he added.

Under the Torres plan, car insurance companies would bid for 5,000-policy blocks of car insurance as policies come up for renewal. The lowest bidder would be awarded each 5,000-policy block. The public bidding process would force insurance companies to be more price competitive, causing rates to drop, Gordon predicted.

By creating greater price competition and eliminating the costs of litigating personal injury cases, SB 684 would put half the dollars paid out for insurance claims each year back into drivers' pockets in the form of lower insurance costs, Gordon said.

He added that the higher gas tax and fees would result in every driver paying his or her fair share, and it would eliminate the need to buy auto insurance individually.

The California Trial Lawyers Association does not share Torres' and Gordon's enthusiasm for SB 684, said the barrister group's spokeswoman Dina Burns. "Is it fair to ask California's to give up their right to sue the parties involved in an accident that has made somebody a quadriplegic?" Burns asked.

Instead, the lawyers' trade group is advocating a plan that would create a "pay-at-the-pump" insurance system with a mandatory arbitration clause. In addition to the arbitration clause, the lawyers' preferred plan would preserve the injured party's right to sue, Burns said.

Meanwhile, Nancy Anderson, a spokeswoman for Allstate Insurance Co.'s Glendale office, was even harsher in her assessment of Torres' "pay-at-the-pump" program. She said it could ultimately turn out to be a disaster. "The proposed taxes and fees are not high enough to pay off all the potential claims," Anderson charged.

John Millen, a spokesman for Los Angeles-based Farmers Insurance Co., was a bit more upbeat, saying he supports the no-fault clause of the Torres bill. But he warned: "This has the potential to become a bureaucracy that will make the Department of Motor Vehicles look like a small business."

Responding to insurers' qualms, Gordon said the Torres bill calls for the state to act only as a collector of the taxes that are used to pay the premiums to insurance companies. That mere collecting function would not create a bureaucracy, he insisted.

State Farm Insurance Co., which wrote $2.4 billion of car insurance for 3.2 million California drivers last year, has also come out publicly against SB 684.

"We like the no-fault provision of the bill but are opposed to the rest of it," said Marsha Davis, a spokeswoman for State Farm's Westlake Village-based division. "We are still gathering data on the bill, but basically, we don't like the fact that an individual who owns a small car that gets better mileage automatically pays less into the insurance fund than a person who drives a large, older car that doesn't get good mileage," Davis said.

The role that the California Department of Motor Vehicles would play in Torres' plan is still unclear. Theoretically, the DMV would have to revamp its data processing system to bill drivers for registration and licenses according to their driving record. Bill Madison, a DMV spokesman, said the department has not yet completed its analysis of SB 684.

If SB 684 passed, the state constitution would have to be amended to prohibit any litigation involving auto insurance claims.