Judge’s tentative ruling refuses to block new rules on auto insurance rates
SACRAMENTO (AP) – A Sacramento judge issued a tentative ruling Wednesday refusing to block new regulations requiring auto insurers to base their rates mainly on motorists’ driving experience, records and miles driven rather than where they live.
The tentative decision, if it stands, would be a victory for state Insurance Commissioner John Garamendi and advocates of Proposition 103, a ballot measure approved by voters in 1988.
Proposition 103 requires auto insurers to base their rates primarily on a driver’s record, miles driven annually and years of driving experience. It also allows 16 optional, secondary factors, including where the motorist lives.
Garamendi issued regulations in June to implement those provisions and replace rate-setting rules established by one of his predecessors, former Commissioner Chuck Quackenbush. Under those rules, one or more of the optional factors could outweigh the three primary factors.
The American Insurance Association challenged the Garamendi regulations, contending they would result in “arbitrary rates” unrelated to insurance costs and penalize rural residents who face fewer driving risks than their urban counterparts.
In his tentative ruling, Sacramento County Superior Court Judge Loren McMasters said those claims were undercut by studies showing that where motorists live was not the “greatest indicator of the risk of loss” by insurers.
The Automobile Club of Southern California was able to issue a rating plan in response to Garamendi’s regulations that resulted in rate cuts for 88 percent of its customers and increases of more than 5 percent for only 1.7 percent, McMasters added.
His tentative decision would deny the association’s request for a preliminary injunction blocking the regulations. McMasters said the association hadn’t demonstrated that its lawsuit against Garamendi was likely to succeed.
Oral arguments on the request for the injunction are scheduled for Thursday. Insurance companies are required to submit new rating plans carrying out the regulations by Monday.
Norman Williams, a spokesman for Garamendi, said the commissioner was “very pleased with (McMasters’) analysis of the issue to this point. He realizes it’s tentative and he will wait until the final ruling to comment further.”
A spokeswoman for the industry association, Nicole Mahrt, said it would win eventually, either after McMasters reconsiders his tentative ruling or on appeal.
“This is a very complex issue, and courts have frequently shown deference to the power of the regulator,” she said. “We’re very confident that once the court makes a detailed review of the case, we have strong arguments and we will prevail.”
Harvey Rosenfield, the author of Proposition 103, characterized the lawsuit as a last-ditch effort by “some recalcitrant insurance companies” and predicted it would fail.
“Voters decided this issue almost 18 years ago…,” he said. “The court’s expected ruling will keep reform moving, forcing insurers to play by the rules and judge drivers by their record, not their ZIP code.”