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Wednesday, Oct 4, 2023

Commentary–Props. 30 and 31 Threaten State’s Small Firms

Owning and operating a small business is tough. And unless Propositions 30 and 31 are defeated at the polls in March, it will get a lot tougher.

Small business owners aren’t looking for handouts; they merely seek a level playing field. But now, determined special interests are looking to tilt the playing field in their favor. California’s powerful personal injury lawyers are working furiously to stack the deck against our state’s small businesses by pushing Propositions 30 and 31, which would drive many small businesses out of the marketplace because of higher insurance costs and increased litigation.

The personal injury lawyers characterize their self-serving efforts as “reform.” But a broad-based coalition of consumer, small and large business, ethnic, public safety, education, local government, agriculture, labor, taxpayer, insurers and senior citizens groups knows better. They vigorously oppose the propositions, but they face formidable opposition from fee-seeking personal injury lawyers.

Why are the lawyers so committed to these propositions? Well, they stand to reap billions of dollars in additional legal fees if voters don’t reject these measures on Election Day, March 7. While personal injury lawyers prosper from the new measures, small business owners would face nightmarish consequences. An examination of these propositions reveals exactly how devastating the propositions would be to small businesses across the state.

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Under Propositions 30 and 31, personal injury lawyers , who collect as much as 40 percent of all settlements and awards , would be allowed to file two lawsuits for a single accident. This means that the lawyers could sue not only the party they think is responsible for an injury (read small business owner), but also that party’s insurance company as well.

Increases Lawyers’ Leverage

The propositions would give the lawyers increased leverage over the claims-settlement process. No matter how groundless or absurd the lawsuit, insurance companies will be forced to settle cases rather than face the threat of enormous legal fees associated with a trial. These extorted settlements will far exceed the actual injuries or damages sustained. As a result, insurance companies will incur tremendous costs for claims that will be passed along to small businesses in the form of higher premiums.

The state’s nonpartisan legislative analyst warns they “would likely increase liability insurance costs in California.” And, according to an analysis conducted by former state legislative analyst William Hamm, insurance rates could rise by as much as 15 percent costing California businesses and consumers $1.5 billion annually.

These additional costs will be fatal to untold numbers of small businesses, which routinely operate on razor-thin profit margins. Among California businesses, small businesses are least able to afford dramatic increases in operating costs. Almost all will likely be forced to pass these staggering costs along to their consumers in the form of higher prices. Or, worst of all, they could be forced to lay off workers just to survive.

Impacts Everyone

The terrible effects of these propositions would not stop with the business community. These measures will also lead to more insurance fraud, higher taxes, higher insurance rates and higher costs for goods and services for all of us. Homeowners, local governments, schools and others who purchase supplemental liability policies will all face higher insurance costs. They would harm virtually every Californian , with the lawyers being an exception.

Personal injury lawyers don’t want voters to remember that from 1979 to 1988, a similar system to Propositions 30 and 31 created a heavy burden for California citizens. The record shows that before the California Supreme Court threw out the two-lawsuit system, it created a huge financial windfall for personal injury lawyers , and a budget-breaking bust for everyone else.

While this system was in effect, auto liability lawsuits increased by more than 82 percent. Non-auto liability lawsuits jumped more than 50 percent, according to California’s Judicial Council. In other words, during the 1980s, California businesses and homeowners were sued 50 percent more often as a result of this system. More lawsuits meant more money for the lawyers but cost small business owners both time and money , two very limited resources for California’s smallest entrepreneurs.

Coercive System

In 1988, the California Supreme Court overturned the two-lawsuit system with a scathing opinion that said it had resulted in “coercive settlements, excessive jury awards and escalating insurance, legal and other transaction costs.”

The personal injury lawyers brag the propositions are their “biggest victory in 40 or 50 years.” Our judicial system is carefully balanced in a constant struggle to protect the rights of all Californians. Our courts and laws should not be an instrument to line the pockets of powerful special interests and to unfairly persecute hard-working small business owners. Unfortunately for all Californians, that is exactly what will happen unless the propositions are soundly defeated the first Tuesday in March.

Join the California Chamber of Commerce, the National Federation of Independent Business, the U.S. Chamber of Commerce and the California Small Business Roundtable in opposing these anti-business, anti-consumer measures.

Be sure to vote Election Day. Vote “no” on Propositions 30 and 31. And ask your friends, neighbors and customers to do the same.

Hopper is California state director for the National Federation of Independent Business.


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