Three insurance trade groups announced they filed suit yesterday to block new California regulations that would limit their use of geographic location data to rate policyholders in the state.

In addition to the insurer groups, an earlier action was filed by a farmers' organization.

Filed in Sacramento Superior Court, the insurer groups' suit seeking a temporary restraining order was brought on behalf of the Association of California Insurance Companies, the American Insurance Association and the Personal Insurance Federation of California. The three trades represent more than 90 percent of insured drivers in California.

Their action is the latest move in a continuing conflict between property-casualty insurers and California Insurance Commissioner John Garamendi.

In May, during his campaign to win the Democratic Primary for lieutenant governor, auto insurers unleashed an advertising campaign attacking the regulatory change and Mr. Garamendi, who won his party's nomination, accused them of blackmail.

The suit seeks declaratory the rules are illegal and asks for injunctive relief to stop enforcement of the rating regulations. The organizations contend the new rules will harm "millions" of policyholders and force "60 percent of California drivers to pay more for auto insurance so other motorists can pay less."

A similar lawsuit was filed Tuesday by the California Farm Bureau Federation. The Farm Bureau is seeking to stop implementation of the regulations on behalf of its 88,000 farm family members who drive in rural and suburban neighborhoods.

Sam Sorich, ACIC president, in a statement announcing the suit, said the new regulations will "significantly reduce where a car is garaged as a rating factor in developing auto insurance rates."

"As a result, insurers will be forced to charge unfair rates, compelling a majority of drivers--particularly in rural areas--to subsidize premiums paid by other Californians," he said.

"Under these regulations, the state will be picking 'winners' and 'losers' and forcing insurers to charge arbitrary rates," said Rex Frazier, president, PIFC.

Mr. Frazier added, "The California Court of Appeal ruled in 2000 in a case known as Spanish Speaking vs. Low that the auto rating regulations used today are legal and comply with the requirements set forth in Proposition 103. These new regulations violate Proposition 103 because they would require insurers to charge rates that do not reflect the actual risk of loss."

According to a spokesperson for Mr. Garamendi's office, the new regulations are aimed at fulfilling a Proposition 103 mandate requiring rates to be tied directly to driving record, frequency of use and number of years driving.

Norman Williams, a spokesperson from Mr. Garamendi's office, said earlier that it was "difficult to argue that the regulations will do the harm that they [insurers] believe."

Mr. Williams noted that the Automobile Club of Southern California, in addition to revising its rating factors according to the regulations, was able to give its 1 million customers a 7 percent premium decrease.

But according to Ken Gibson, AIA vice president, western region, Mr. Garamendi has "ignored the concerns of millions of Californians. Decades of data prove that insurance costs differ among areas in California."

Mr. Gibson said that, "Besides being actuarially sound, it is just common sense that a driver traveling 50 miles a day through congested downtown Los Angeles faces a far greater risk of having an accident than another motorist traveling the same distance on rural roads."

The Superior Court has 16 working days to conduct a hearing on the request for injunctive relief.

Special Reports /

Calif. Insurers Sue To Keep Geographic Rating

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