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Court Upholds Auto Insurance Ruling

Finance: Justices refuse to review a decision that said firms can keep basing rates partly on where drivers live.


SAN FRANCISCO — Auto insurance rates can continue to be based partly on where a driver lives, under a decision Wednesday by the California Supreme Court.

The court, meeting privately in conference, voted 4 to 3 to let stand a 1st District Court of Appeal ruling that said insurance companies may base charges for car insurance partly on drivers' ZIP Codes.

Consumer activists blame the practice for high rates in some cities, including Los Angeles. They had argued that the use of ZIP Codes in rating drivers violates Proposition 103, the 1988 ballot measure that sought to reduce insurance premiums in California.

The cities of Los Angeles, San Francisco and Oakland had urged the court to grant a review. Chief Justice Ronald M. George and Justices Stanley Mosk and Joyce L. Kennard voted to hear the case. But Justices Ming W. Chin, Marvin R. Baxter, Kathryn M. Werdegar and Janice R. Brown voted to let the appellate ruling stand.

Bill Sirola, a spokesman for State Farm, said a driver's safety record is the primary factor determining rates but that location also is considered because it strongly affects the risk to the insurance company. For instance, he said, car theft and the cost of repairs are greater in some areas than others.

Harvey Rosenfield, the political activist who wrote Proposition 103, called Tuesday's decision an outrage and accused the court majority of ducking the issue.

"I am very concerned that we are reverting to an era where the insurance industry has the ear of a majority of the Supreme Court," Rosenfield said.

Proposition 103 required insurance companies to base auto rates on a driver's safety record, years of experience and number of miles driven. Consumer activists said the insurers' current rating system discriminates against low-income residents.

A young male driver in South-Central Los Angeles would pay $7,844 for coverage by one major insurance company, according to consumer activists in the case. A male driver with the same driving record would pay only $1,706 for insurance in San Luis Obispo, they said.

A trial judge had ruled in favor of the consumer groups, but the Court of Appeal in San Francisco sided with insurers in December. A three-member court panel reasoned that insurance company costs are strongly affected by where drivers live.

Vanessa Wells, an attorney for State Farm Insurance Cos., said Wednesday's decision ensures that auto "rates are not going to be jerked up immediately" to subsidize drivers in Los Angeles, San Francisco and Oakland.

The case was Spanish Speaking Citizens' Foundation v. Low, SO95061.

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