Nader Assails Deep-Pockets Initiative as ‘Hoax’ on Public

SACRAMENTO —  One year after California voters adopted a controversial reform of the state’s liability laws, consumer activist Ralph Nader on Thursday charged that the measures enacted here and in states all over the nation were a “hoax” on the public.

In a Capitol press conference and in a speech to the Senate, Nader said promises of lower insurance rates by sponsors of Proposition 51, the so-called deep-pockets initiative, failed to materialize although insurance companies chocked up a “staggering record of profits.”

And Nader, who was joined by a long list of consumer and environmental activists, strongly suggested that his forces will try to place their own initiative on the 1988 ballot to impose comprehensive controls over insurance rates and practices.

“I want to assure you our side does not play defensive ball,” Nader said in a stern warning directed at a group of insurance lobbyists who attended the press conference.

Later, he told the Senate that the lesson of Proposition 51 is that “if you reduce the rights of the weak and injured, (the insurance industry) will promise to reduce their rates from the outrageous level down to the exorbitant level.”

Nader’s comments and those of the other consumer activists drew sharp reaction from sponsors of Proposition 51, who charged that the initiative had been undone by trial lawyers who have tried to block the reform in the courts.

“The full impact of Proposition 51 has not yet been felt, but not because the law will not work,” said Gene Livingston, an author of the initiative and chairman of the Assn. of California Tort Reform. The problem, Livingston added, is that “lawyers are using the courts to achieve what their dishonest campaign could not accomplish.”

Even as Nader was speaking, the liability reform group was busy circulating Trial Lawyers Assn. correspondence that they said suggest that some of Nader’s backers are really fronts for the trial lawyers, who fear the effect of the reforms on their legal fees.

All of this rhetorical point-counterpoint is evidence of the emotional fallout from the bitter high-spending campaign that resulted in the overwhelming victory of Proposition 51 on last June’s ballot.

Sponsors of the initiative, which was intended to curb the size of damage awards in personal injury and product liability cases, told voters it would help lower insurance rates and make coverage more readily available. It requires that in cases of multiple defendants, each be assessed according to the degree of fault for such non-economic damages as pain and suffering. Previously, wealthier defendants who were minimally at fault could be forced to pay a major share of damages if other, more culpable, parties lacked the means to pay.

Buoyed by voter approval of the initiative, the reform groups are pushing for more radical changes in liability laws, specifically measures that would place strict limits on the size of “pain and suffering” damages, cut deeply into lawyer contingency fees and make it far more difficult to win punitive damages against companies that manufacture or sell dangerous products.

Bills to enact those measures all have been rejected in recent weeks in the Legislature, and their sponsors have strongly indicated that they plan to put the question directly to voters in another initiative.

Nader’s appearance in Sacramento was an attempt to warn the insurance industry that a second initiative would be fought fiercely by national groups as well as the California consumer organizations and trial lawyers who failed to defeat last year’s measure.

“If they believe there will be a repeat of Proposition 51 where all they have to do is raise $15 million or $20 million and plaster the tube with their deceptive ads and win, they are sadly mistaken,” Nader said.

To bolster their argument, the consumer organizations released a recent study by the rate-making arm of the insurance industry that concluded that many of the narrowly written reforms enacted in California and elsewhere will do little to reduce most liability claims. But the report, a $1-million undertaking that looked at a number of states and hypothetical injury claims, also asserted that enacting a trio of much broader legal changes could have a major impact in reducing the size of damage awards.

Meanwhile, the consumer groups are pinning their hopes on two bills, heavily fought by the insurance lobby, that would remove the industry’s exemption from state antitrust laws and set up a mechanism for controlling rate increases.