Opinion ID: 1202658
Heading Depth: 2
Heading Rank: 1

Heading: The Insurance Windfall

Text: I am greatly troubled by the majority's apparent concern that application of the Act to cases untried on the Act's effective date would result in an unwarranted windfall to insurance companies because they computed their pre-Proposition 51 premiums on the basis of the former rule of unlimited joint and several liability. A little perspective here is in order. In Li v. Yellow Cab, supra, 13 Cal.3d 804, this court abrogated the traditional all-or-nothing doctrine of contributory negligence and adopted in its place a rule of comparative negligence. A few years later, in American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578 [146 Cal. Rptr. 182, 578 P.2d 899], we applied similar comparative fault principles to multiple tortfeasors, but retained the traditional rule of joint and several liability. In each case, we held that the new rule shall be applicable to all cases in which trial has not begun before the date this decision becomes final.... (Italics added, Li v. Yellow Cab Co., supra, 13 Cal.3d at p. 829; Safeway Stores, Inc. v. Nest-Kart (1978) 21 Cal.3d 322, 334 [146 Cal. Rptr. 550, 579 P.2d 441] [applying retroactively the rule adopted in American Motorcycle ].) By thus retrospectively eliminating the existing complete defense of contributory negligence and yet retaining joint and several liability, this court imposed substantially increased liability upon insurance companies under policies the premiums for which had been calculated on the basis of the preexisting law. Yet we expressed no concern in those decisions that insurance companies were thereby compelled to pay greatly increased sums with respect to risks they could not have anticipated and for which they were not compensated. Nor did we decline to apply our abrupt change in the law retrospectively because to do so would have been unfair. On the contrary, we applied our rulings as broadly as constitutionally permissible, notwithstanding strenuous objections that such a radical alteration of existing law required legislative rather than judicial action, because we were persuaded that logic, practical experience, and fundamental justice counsel against the retention of the doctrine rendering contributory negligence a complete bar to recovery.... ( Li v. Yellow Cab Co., supra, 13 Cal.3d at pp. 812-813, italics added.) Consistency and impartiality would appear to demand, at the very least, that this court view the fiscal consequences to insurance companies of a retrospective application of Proposition 51, with the same cool detachment it manifested in Li and American Motorcycle. Proposition 51, after all, was also designed to remedy certain perceived injustices in the existing tort liability system. If a retrospective application results in a windfall to insurers, what of it? Where the logic and justice of a retroactive application is otherwise compelling, I perceive no principled basis for holding to the contrary simply because the insurance industry might benefit. Indeed, if the majority's assertion that a retroactive application will result in savings to insurers is correct (the contention is premised on speculation, not on any hard evidence), it would appear to militate in favor rather than against retroactivity. As previously discussed, one of the goals of Proposition 51 was to slow the insurance-premium spiral by holding defendants liable for noneconomic damages only in proportion to their percentage of fault. As set forth in the Act's findings, the so-called insurance crisis threatened financial bankruptcy of local governments ... higher prices for goods and services to the public and higher taxes to taxpayers. To the extent that the Act results in less exposure and smaller payouts than insurance companies might otherwise have anticipated, it only serves to further these goals. The majority's inflated concern with insurance windfalls is thus largely misguided. That concern does, however, expose the unstated bias underlying the majority's opinion. Implicit in the majority's analysis is the assumption that Proposition 51 was essentially a private-interest bill designed to offer aid and comfort to corporate defendants; the broader its scope, therefore, the greater the prejudice to plaintiffs. However, if we were to judge the question before us strictly on a standard of fairness to plaintiffs, there is no doubt that the balance would fall squarely on the side of retroactivity. The Act's statement of findings makes clear that its purpose was not exclusively or even principally to aid insurance companies. Ultimately, it is plaintiffs, not insurers, who suffer when tortfeasors lack insurance to pay judgments. It is the community as a whole, not the insurance industry, which suffers when day-care centers must close because they cannot afford insurance. Parochial interests, to be sure, supported the Act, but the People enacted it. Their decision deserves an application equal to the pressing social and economic concerns which inspired it.