Industry Disputes Nader Assertions : Belli Suit Asks Refunds of Insurance Firms’ Charges

In a new move aimed at insurance industry profits, San Francisco attorney Melvin Belli has filed a class-action lawsuit asking that California insurance companies be ordered to refund what he claims are massive overcharges in recent years.

The 80-year-old Belli on Saturday called his lawsuit, filed last week in San Francisco Superior Court, a natural follow-up to suits recently filed by nine state attorneys general, including California Atty. Gen. John K. Van de Kamp, accusing several insurance companies, reinsurers and insurance consultants of conspiracy to raise rates by restricting the availability of liability insurance.

Belli said that he hopes the pretrial discovery processes will reveal how much more insurance companies charge for auto, homeowners and various kinds of liability coverage than they ever realistically expect to pay out in claims.

Plea for Public Help

Belli said he will advertise in both major San Francisco newspapers to ask the public to sign on as plaintiffs in his lawsuit.

Belli at first said that he would work “pro bono,” meaning he would charge no fees. But a moment later he said that “maybe” he would charge fees, if his costs “get out of line.” He said policy holders who do not join in the suit could also ultimately benefit from any refunds and damages the courts may order.

Belli argued that legal action is a better method of bringing down rates than any initiative that might qualify for the ballot this year.

Belli, in allegations similar to those made Friday by consumer advocate Ralph Nader, called insurance “one of the most profitable businesses in the country.”

But this point is strongly challenged by industry spokesmen. Responding to the Nader statements, the Insurance Information Institute challenged the notion that the industry is excessively profitable, or, as Nader alleged, does not pay taxes.

Source of High Cost

“Nader ignores the real issue behind high auto insurance rates in California, namely, that the cost of providing that insurance has skyrocketed over the past decade,” the institute said.

In the last 10 years, the industry group said, average vehicle costs are up 90%, physician’s fees up 107.6%, hospital rooms up 151%, and automobile replacement parts up 56%, while filings of lawsuits, insurance fraud and the number of uninsured motorists have also shot upward.

As for taxes, the institute said, the industry nationally paid $3.3 billion in federal taxes in 1987, and in California alone, $622.7 million in state premium taxes.

Nader was present Friday at the release of a report that said 13 of 15 major California insurance providers surveyed had paid no federal income taxes between 1982 and 1986, receiving instead an average of $304 million in tax credits.