After insurance companies were so rash as to support efforts to obtain liability reform through the initiative process, trial lawyers struck back in 1988 with the rate-slashing Proposition 103, which inflicted huge losses on the industry.

Now, in the wake of drastic declines in miles driven as a result of the COVID-19 emergency, many of the biggest national auto insurers have announced voluntary programs to refund a portion of premiums to motorists, as a goodwill gesture reflecting in part the expectation that claims payouts will be much lower than anticipated. Those checks will come in handy for consumers in most states, but there’s a problem in California: any refunds, even those voluntarily embraced by insurers, appear to violate the terms of Prop 103. Ray Lehmann explains at Insurance Journal. He concludes:

The result is absurd. It’s a bug in the text. But because it was passed by the people of California as a ballot proposition, these sorts of bugs can’t simply be fixed by the Legislature. Any changes to the law require two-thirds majorities in both chambers, and even then, they must be found to “substantially further” the goal of the proposition.

It is yet another example of ways that the structures of Prop 103, well-intended though they may be, have come to be a straitjacket on both insurers and their customers.

In other insurance news, a few days ago I wrote about business-interruption insurance, blasting interest groups that want insurers to have to pay out despite policy exclusions. Now President Donald Trump has weighed in about how businesses supposedly should be able to recover losses for pandemic interruption, policy language or no.

He’s wrong. As I wrote Monday. “This category of risk has been widely grasped for many years… pandemic-related business interruption coverage [was] neither promised nor paid for at the time.” Seven Republican Senators, including Tim Scott (R-S.C.) and Ben Sasse (R-Neb.) have signed a well-informed letter opposing the idea.

Yes, the situation is tough on a dozen business sectors, starting with restaurants and travel. But there’s no way they should be allowed to raid insurance coffers of reserves needed to pay countless other claims whose coverage *was* promised and paid for in premiums. And if we let them get away with that kind of raid, no insurer will ever be able to count on the language of a contract again. Guess what’ll happen to rates when they realize they need to cover that kind of unpredictable future risk?

Auto insurance refunds? California’s Prop 103 may turn out to ban them is a post from Overlawyered - Chronicling the high cost of our legal system

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Public officials are, of course, free to criticize groups with which they disagree. But they cannot use their regulatory authority to penalize advocacy groups by threatening companies that do business with those groups. And here the state has admitted, in its own words, that it focused on the NRA and other groups not because of any illegal conduct, but because they engage in “gun promotion” — in other words, because they advocate a lawful activity.

Substitute Planned Parenthood or the Communist Party for the NRA, and the point is clear. If Cuomo can do this to the NRA, then conservative governors could have their financial regulators threaten banks and financial institutions that do business with any other group whose political views the governor opposes. The First Amendment bars state officials from using their regulatory power to penalize groups merely because they promote disapproved ideas.

My post from May on the topic is here. More on the ACLU brief: Dan M. Clark, New York Law Journal; Declan McCullagh.

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