Welcome to my “daily comment.” The ground rules Ceres and I have agreed to are simple. I can write whatever I want, ranging from a sentence to an epic. I can even say things like, “Don’t trade stocks yourself — no matter how cheap the commissions. For most people, it’s smarter to invest through no-load mutual funds.” Which it is (though it may be less fun).

California’s auto insurance system is a mess. Rates are sky-high, yet badly-hurt crash victims get almost nothing. Why? Because to collect they have to win the the “lawsuit lottery.” But that’s hard because there’s often no one to sue.

There’s no one to sue if it’s a hit and run (there were 18,317 hit-and-runs in Los Angeles county alone in 1992 according to the LA Times) . . . or if it’s a one-car accident (about 16% of the total, according to the National Highway Traffic Safety people) . . . or if the other driver wasn’t at fault (it happens!) . . . or if he was but you can’t prove it.

And there’s no one to sue if the other driver had no insurance — as 28% of California drivers do not (about 5 million of them, including many of those most likely to cause accidents).

Even if you can prove the other guy was at fault, and he did buy insurance, he may well have bought only the statutory minimum coverage — $15,000 — leaving you perhaps $9,000 after legal fees and expenses to cover your $400,000 in medical costs, rehabilitation and lost wages (not to mention anything for your pain and suffering).

So I’ve helped to put three propositions on the March 26 California ballot, the first of which — Prop 200 — would fix this mess. A pure no-fault system (only drunk drivers could be sued), it would save drivers a fortune in the legal costs, fraud and uninsured motorist subsidies that drive up prices, and drive down benefits, today.

Needless to say, the personal injury lawyers — who would lose some of the billions consumers would save each year — are going to do whatever it takes to keep the current system. Even if it means being a little sneaky.

For example, on January 9 the San Francisco Chronicle published a letter from one Jeff Reuvekamp of Orinda, California, that asked why non-Californians like me were “trying to force no-fault insurance [on the people of California].”

The answer he seemed to be hoping for — because his letter was almost word for word from the pamphlets of the California personal injury lawyers — was that we are contributing to this effort because we are heartless, greedy S.O.B.s who hope to profit in some way.

In fact, there’s no way for me to profit from the passage of Prop 200. (At least none I’ve been able to figure out.) But that’s clearly the impression he intended to convey. He ended his letter with a question: “could it be the money?”

What he didn’t disclose in the letter — and here comes what I’d call the sneaky part — is that while he himself is not a personal injury lawyer, his wife, Mylene is. So if Prop 200 passes, it’s actually not my finances that will be affected, as he implied — it’s his. He’s the one with the undisclosed stake in this. But the Chronicle either didn’t bother to check that out, or didn’t think it was worth readers’ knowing.

If Prop 200 passes, RAND estimates that the standard $1 million-per-person policy it provides would cost California drivers 39% LESS, on average, than the minimum $15,000 policy costs today.

What’s more, every child under 18 would automatically be covered for at least $50,000. And every elderly person crossing the street or kid on a bike or skateboard would AUTOMATICALLY be covered for up to $1 million in actual costs, plus up to $250,000 more in pain and suffering. And that would be true even if they couldn’t prove fault . . . even if it were a hit-and-run . . . and even if they had purchased no insurance.

All this for far LESS than auto insurance costs Californians today.

How is this possible? It certainly sounds too good to be true. But it =is/= true, because Prop 200 would:

  • Eliminate most of the $2.5 billion in legal costs built into today’s auto insurance system (today, more auto insurance dollars actually go to lawyers than to doctors, hospitals, nurses, and chiropractors combined);
  • Remove the incentive for most fraud (which costs Californians billions more);
  • And largely end the subsidy of uninsured motorists (another billion a year).

Jeff Reuvekamp is against all this. Could it be the money?

(If you have friends in California, could you cut and paste these comments into your e-mailer and broadcast them far and wide? The bottom line: Vote YES on Props 200, 201 and 202 on March 26.)

Tomorrow: The Other Two Propositions


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