King v. Meese

Decision Date26 October 1987
CourtCalifornia Supreme Court
Parties, 743 P.2d 889, 56 USLW 2257 M.L. KING et al., Plaintiffs and Appellants, v. George MEESE, as Director, et al., Defendants and Respondents. L.A. 32133.

Armando M. Menocal, III, Public Advocates, Inc., San Francisco, for petitioners.

Christopher Foley, Deputy, Office of the Atty. Gen., Los Angeles, for respondents.

PANELLI, Justice.

In this case we are called upon to determine whether, as plaintiffs allege, the 1984 Robbins-McAlister Financial Responsibility Act (Stats.1984, ch. 1322), when considered in relation to the relevant provisions of the Insurance Code pertaining to automobile insurance, fails to provide drivers with adequate procedural due process of law. For the reasons set forth below we hold that plaintiffs' concerns are legally without merit, and are more properly addressed to the Legislature than to the courts.

I. Legislative Framework

California first enacted a financial responsibility law in 1929, which, like those that followed, required all drivers to be "financially responsible" (usually by means of insurance) for any injury they caused while driving. However, enforcement of the requirement was triggered only when the driver was at fault in an accident causing either bodily injury, or property damage in excess of $100 (later amended to $200). Even then, there was no sanction for failing to have insurance if the driver was able to post a bond in an amount determined by the Department of Motor Vehicles (DMV) to be sufficient to meet the likely liability. Failure to either post a bond or provide proof of financial responsibility resulted in suspension of driving privileges.

In 1931, we held this law constitutional as against a substantive due process challenge, specifically that not all drivers could afford to comply with the law, and that negligent wealthy drivers could continue to drive but that not so negligent but less affluent drivers could have their licenses suspended. (Watson v. Division of Motor Vehicles (1931) 212 Cal. 279, 298 P. 481.)

In 1974, the financial responsibility law was amended to require the posting of a bond or the filing of proof of financial responsibility whenever a driver was involved in an accident resulting in either bodily injury, or property damage exceeding $200, regardless of fault. That too was held to be constitutional in light of an uncodified statute declaring that the purpose of the law was not so much to deter negligent drivers, but rather to insure that everyone, negligent or not, was able to compensate for any harm they caused while driving. (Stats.1974 ch. 1409, § 1, held constitutional in Anacker v. Sillas (1976) 65 Cal.App.3d 416, 421-422, 135 Cal.Rptr. 537.)

In 1984, the Legislature, concerned that too many motorists still were not financially responsible, enacted the Robbins-McAlister Financial Responsibility Act (1984 Act). In addition to the requirements of prior enactments, the 1984 Act allows a peace officer to request proof of financial responsibility "whenever a notice to appear is issued" for any alleged moving violation. (Veh.Code, § 16028.) 1 Failure to provide such proof is itself an infraction. (Ibid.) However, if it is established that the driver actually was financially responsible at the time in question notwithstanding the lack of written evidence, the citation will be dismissed. (Veh.Code, § 16028, subd. (e).) If such proof is not forthcoming, the driver is subject to a fine ranging from $100 to $240. (Veh.Code, § 16028, subd. (a).) Moreover, within 60 days of that conviction, the driver must provide proof of financial responsibility (and maintain it for three years) or the driver's license will be suspended. (Veh.Code, § 16034.)

From the foregoing, it is clear that the 1984 Act significantly increased the need for insurance. Now, for the first time, failure to have written evidence of financial responsibility is itself an offense. Nonetheless, the full implications of the financial responsibility laws cannot be understood without reference to the Insurance Code.

California is a so-called "open rate" state, that is, rates are set by insurers without prior or subsequent approval by the Insurance Commissioner (Commissioner). (Ins.Code, § 1850.) This is not to say, however, that there is absolutely no regulation of the rates. California law does require that rates not be "excessive, inadequate or unfairly discriminatory." (Ins. Code, § 1852.) No rate is excessive unless: "(1) such rate is unreasonably high for the insurance provided and (2) a reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable." (Ibid.) Risk classifications are permissible if based on any reasonable (i.e., actuarially sound), and not prohibited, ground. (Ins.Code, § 1852, subd. (d).) Although the term "unfairly discriminatory" is not defined in Insurance Code section 1852, section 11628 of that code prohibits discrimination by an insurer with regard to issuance of policies, or the terms of such policies, on the basis of "race, language, color, religion, national origin, ancestry, or location within the same geographic area." "Geographic area" is defined as an area "not less than 20 square miles," and is made up by combining a series of contiguous zip code zones. Under the statutory scheme, different geographic areas may be treated differently.

Although insurers need not file their rates with the Commissioner, nor obtain approval of rates, the Commissioner may on his own initiative investigate rates. (Ins.Code, § 12924.) Moreover, a person objecting to a rate or classification may file a complaint with the insurer and, if dissatisfied with the insurer's response, file a complaint with the Commissioner. (Ins. Code, § 1858.)

The Commissioner may, at his option, dismiss the complaint without investigation. (Ibid.) In fact, the Commissioner routinely does so if the complaint fails to come within his perceived jurisdictional powers. A common example of a routinely dismissed complaint is one alleging a refusal by an insurer to provide coverage to an applicant. 2 If the Commissioner does investigate, he may hold public hearings, issue findings, and assess penalties. The decisions of the Commissioner are subject to judicial review. (Ins.Code, § 1858.6.) Should the Commissioner make a determination that the rates are excessive or are not excessive, then the complainant, on request, is entitled to know the basis of such determination. (Ins.Code, § 1858.7.) In this regard, plaintiffs allege that only once in the last decade has the Commissioner declared a rate to be excessive.

In California, in addition to the regular and customary sources for the purchase of insurance coverage which most are familiar with, drivers may be insured through the California Automobile Assigned Risk Plan (CAARP). (Ins.Code, § 11620 et seq.) By statute this plan is available to any driver otherwise entitled to insurance but who has been unable in good faith to obtain it within the past 60 days. (Ins.Code, § 11620; Cal.Admin.Code, tit. 10, ch. 5, subch. 3, art. 8, § 2430.) 3 All insurers are required to participate in the program. (Ins.Code, § 11620.) CAARP offers the statutorily required minimum insurance plus optional medical and uninsured motorist coverage. (CAARP, §§ 2406-2408.)

The CAARP rates are set by the Commissioner after public hearings, and are based on a number of classifications (including geographical area). There is a rate differential of $600 between drivers with no accidents or traffic violations in the last three years and those with twelve or more "points" during that period. 4 (Prior to 1987, the differential was $200.) Under CAARP, the highest annual premium for "good drivers" (i.e., those with zero points) is for youthful drivers in the highest rated geographic areas (e.g., South Central Los Angeles). The annual premium for these drivers is $662. For adult drivers in the highest rated geographic area who have zero points, the annual premium is $516. CAARP provides that the premium can be paid in five installments provided a 25 percent deposit is made. In order to use the installment plan an additional $2 fee per installment is charged. (CAARP, § 2443.1.)

In most parts of the state, CAARP rates are higher than those offered by voluntary insurers. However, in certain areas, including the area in which all plaintiffs reside (South Central Los Angeles), CAARP is allegedly less expensive than non-CAARP insurance. It appears that statewide, approximately 35 percent of those with CAARP insurance are drivers with no points.

Being placed with CAARP is really a "nondecision." That is, no entity "decides" to place a driver in the program. Rather, placement in the plan results as a condition of being "unable to procure [insurance] through ordinary means." The inability to procure insurance by ordinary means is, of course, the result of determinations made by individual insurers to refuse to provide coverage to the driver in question. Hence, eligibility for CAARP is not reviewable because there is no decision to review.

II. Factual and Procedural Background of this Litigation

The individual named plaintiffs in this action are seven residents of South Central Los Angeles. 5 At the time this action was filed, they ranged in age from 19 to 73. Most were retired or unemployed, but one was employed and earning $17,000 a year. Some suffered from medical disabilities (none of which precluded driving), and some relied on driving to go to and from work or to the doctor. Some had been insured in the recent but not immediate past, while others had not been insured.

Despite the above differences, all of the named plaintiffs shared some common characteristics. As previously noted, all lived in South Central Los Angeles. None of them had been involved in an accident or had a traffic violation within the last...

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