CAR-INSURANCE DEBATE HEATS UP\No-fault issue returns, but Prop. 200 different from defeated\1988 version.

Byline: Russ Britt Daily News Staff Writer

Eight years after the passage of Proposition 103, the debate over auto insurance rages on in the form of a no-fault ballot proposition.

State voters will decide next month whether Prop. 103, passed in 1988 with the intent of controlling insurance rates, did the trick or needs help from a new initiative, Proposition 200 on the March 26 primary ballot.

No-fault insurance is exactly what the name implies. In an auto accident, no blame is laid on any of the drivers involved and each party's insurance carrier compensates its policyholder for damages.

"Conceptually it seems to make sense," said Eric Wiening, assistant vice president for the independent research group American Institute for Chartered Property Casualty Underwriters in Malvern, Penn. "But in practice, it gets a lot more complicated than that."

Except in cases in which one of the motorists is convicted of drunk driving, is committing a felony or is carrying hazardous material, none of the drivers can sue for damages. Unless a policyholder gets additional coverage for pain and suffering, that motorist cannot receive the equivalent of punitive damages that are now awarded through litigation.

Prop. 200 would create a two-tiered system of coverage in which consumers could obtain either $50,000 or $1 million policies. Those policies would cover economic losses only.

The key for voters is to decide whether they want to forgo the right to sue in favor of unclogging the courts and possibly reducing premiums, said Brian Sullivan, editor of the Auto Insurance Report, a weekly industry newsletter.

The primary arguments for the measure revolve around how insurance companies will be able to cut costs and thus pass those savings on to consumers. Proponents say Prop. 103 can help guarantee that, along with legislative measures now being considered by California lawmakers.

A study by RAND Corp., the Santa Monica-based think tank, concludes that rates will drop 11 to 29 percent.

Stephen Carroll, author of the RAND study, said motorists will receive better coverage because the minimum now allowed is $15,000.

Most motorists who are at fault have little to offer except coverage under their insurance policies, Carroll said. Only in extreme cases are motorists losing out on the ability to sue, Carroll said.

"If that person happens to be driving a late-model Mercedes with an MD license plate, then you would go and sue them. If not, then you don't," Carroll said.

While no-fault insurance has failed in other states, supporters contend that this is the first initiative to curtail litigation severely. Others allow lawsuits if motorists meet certain damage thresholds, and some of the thresholds are so low that they have proven costly to carriers.

Opponents are not happy with the prospect of a legal first in tort reform.

"California is going to be the guinea pig for the rest of the nation," said Kelly Hayes-Raitt, director of Citizens Against Phony Initiatives, one of several groups opposing Prop. 200.

Opponents say states with no-fault insurance have seen rates rise by an average of 45 percent while California's liability insurance has dropped 4.5 percent. With no-fault, motorists suffering serious injuries will lose the ability to sue reckless drivers in most cases.

Mandatory no-fault insurance has been enacted in 13 states. One state, Georgia, has repealed no-fault law completely while others such as New Jersey have put limits on it.

Even if the California proposal is different, there are elements that could raise rates, opponents say.

"The insurance companies will have to pay the good drivers and the bad drivers," Hayes-Raitt said. "It will cost more, and they'll have to raise rates."

Although insurance carriers are not taking a stand on Prop. 200 - and have not as a group donated money to the cause - they philosophically support it, according to Bill Packer, spokesman for the Association of California Insurance Companies. Insurance companies are backing legislative bills.

An industry-supported no-fault insurance measure was on the ballot in 1988 - one of four competing with Prop. 103 that failed - but is coming back amid a tide of tort-reform sentiment. There also are critics who say Prop. 103 did not accomplish all it set out to perform.

That is evidenced by the fact that 30 carriers still have not given policyholders mandatory rebates, critics say. Critics also contend that redlining is still used to determine rates, although it was outlawed by Prop. 103.

Political leaders such as Gov. Pete Wilson seek to cut down on the number of lawsuits through no-fault and two other measures which limit shareholder litigation and attorney contingency fees.

Two no-fault measures are weaving their way through the Legislature, one of which has passed the Assembly. Either of those bills could be politically worthless if voters reject Prop. 200.

"If they defeat the (initiative), the Senate Democrats will have an excuse to kill my bill," said Assemblyman Jim Brulte, R-Rancho Cucamonga, author of Assembly Bill 607, one of the no-fault measures.

Polls show that voters now seem apathetic and may not want to change the current system in which rates have remained steady or declined slightly.

"People don't seem to understand or care about it," Sullivan said of no-fault. "When rates aren't going up, people aren't going to be mad."

Sullivan said the upcoming presidential primary is the perfect time for proponents to get the measure passed. Fewer Democrats will turn out for President Clinton's virtually uncontested nomination bid while more conservative Republicans will hit ballot boxes to decide on a slew of their party's candidates.

"Eighty-nine percent of everyone who draws a breath in Orange County is going to vote," Sullivan said. "If they see it in the same vein as the other tort-reform bills, no-fault has a chance to pass."