The Multinational Monitor

November 1988 - VOLUME 9 - NUMBER 11

T H E    F R O N T

Consumers Beat Insurers

CALIFORNIA VOTERS HANDED the insurance industry a major defeat on election day by passing Proposition 103, which mandates a 20 percent rate reduction from the November, 1987 rates for most property/casualty insurance. In addition to the rate rollbacks, Prop. 103 establishes strict insurance rate regulations and repeals the industry's protection from antitrust laws.

The antitrust exemption, in effect at the federal level and in most states, has long been a source of contention for consumer advocates who claim insurance companies have taken advantage of the exemption and fixed prices at artificially high levels.

Prop. 103 also established a consumer watchdog agency over the industry, and requires the state insurance commissioner, currently appointed by the governor, to be elected beginning in 1990. Prop. 103 was one of five insurance-related initiatives appearing on the ballot. Three of the four were industry proposals, including one to establish "no-fault" auto insurance and one to limit victims' attorneys' contingency fees arising from lawsuits. The third, sponsored by California Attorney General John Van de Kamp, was a less extensive overhaul of the industry's regulatory structure than Prop. 103. All but Prop. 103 failed to win the support of voters. "We win, they lose," Harvey Rosenfield, author of Prop. 103 and director of Voter Revolt, told reporters after the election results were in. "The voters are fed up" with skyrocketing insurance rates, he said. Prop. 103 won despite a massive campaign waged by the insurance industry to defeat it. The insurance industry spent over $70 million promoting alternative initiatives and attacking Prop. 103, compared to the $2.2 million raised by Voter Revolt.

Consumer advocate Ralph Nader, who endorsed the ballot measure and spent time in California promoting it, said that Prop. 103's passage "sends a signal to the entire nation that citizens will no longer tolerate the insurance industry's special protections." Nader's endorsement of Prop. 103 was a crucial factor, because confusion among voters over the five initiatives was significant.

According to Marjorie Berte, chairperson of Citizens for No-Fault, the insurance industry-funded organization promoting a competing proposition, "Every time Nader came to the West Coast," Prop. 103 "would pop up a few points [in public opinion polls] and it would take a million bucks in advertising to bring it back down." As part of their unprecedented $70 million campaign, the insurance industry conducted a last minute television advertising blitz, including ads suggesting that the measure would "encourage" drunk driving in the state.

Both Nader and Candy Lightner, founder of Mothers Against Drunk Driving, disputed that claim. Said Lightner at a press conference the day before the election, "I am deeply disturbed by the insurance industry's . .. false advertising blitz, in which the insurance companies exploit the drunk driving issue.... [Prop. 103] will not encourage drunk driving in any way." Industry front groups also mailed out "voter guides" disguised as party slate cards, issuing "comprehensive recommendations" to voters on candidates and state, county and local ballot measures.

One guide, entitled "California Democratic Voter Manual," endorsed Democratic candidates for president, vice- president, U.S. Senate, Congress and California's State Assembly, while pushing the propositions supported by the insurance industry. Only small print at the bottom of the card acknowledged that "This document was prepared by California Democratic Voter Manual, not an official political party organization."

A similar slate card mailed to Republican voters featured Republican Governor George Deukmejian. On November 9, despite the industry onslaught, Proposition 103 was the law of the State of California. The insurance industry immediately closed ranks behind a common theme: the measure would bankrupt insurance companies doing business in California. "What concerns us now is the constitutional question of whether California can order insurers to commit economic suicide," said Lowell R. Beck, president of the National Association of Independent Insurers. "Requiring a business to sell its product at a loss is simply not realistic," said John Crosby of the insurer-funded No-Fault Campaign. "Proposition 103 [will] produce losses and a drain on our capital," a Traveler Corp. spokesman asserted. And rating agency Standard & Poors declared, "The near-term impact is clear: deterioration of the creditworthiness of many insurance companies."

Nader termed the industry's protestations of financial pain and suffering "a lot of bull.... The 20 percent rate cut is a partial refund for the price gouging of the last four years." The industry response was fast and furious.

Within two days, implementation of the provisions of Prop. 103 was enjoined pending a ruling by the California Supreme Court on industry lawsuits challenging the constitutionality of the measure. Traveler's Insurance refused to renew any of its 23,000 auto insurance policies and State Farm, the largest insurer in California, and Safeco have stopped writing new policies. State Farm has funnelled renewals through its Fire and Casualty division with 20-60 percent rate increases--a move the California insurance commissioner warns violates state law. The Court recently lifted the stay on all provisions of Prop. 103 except the rate rollback and the consumer watchdog group provision, allowing other provisions to go into effect immediately and promised a further ruling in February.

America's Garbage

MOUNTING PILES OF garbage, shortages of landfills near cities and regulations which push up the cost of waste disposal have pushed U.S. industry and communities to look abroad for places to dump their waste.

This has caused a furor in many sectors of Latin America, already indignant over the developed countries' domination of world primary product markets and widening income disparities between the two regions.

Some international organizations have acted to prevent further waste exports. CARICOM, a 13-member economic association of English-speaking Caribbean countries, has come out in opposition to toxic waste imports by any Caribbean nation. Venezuela introduced domestic legislation making it illegal to bring hazardous waste into the country after a Milan, Italy waste disposal firm, Jelly Wax, dumped 2,200 tons of toxic waste in leaky, corroded barrels in Puerto Cabellow, Venezuela in April 1987. "It was deposited ... without proper permission or knowledge, and was not labelled properly," says Iraida Frias, an official at the Venezuelan Embassy in Washington. Four months later, after residents of the area began to complain of sores and a boy died after coming into contact with the barrels, Caracas demanded that the Italian firm retrieve the barrels. Jelly Wax arranged for the waste to be removed.

Venezuela also proposed that the Nairobi-based U.N. Environmental Program draft a convention banning all waste exports. At a U.N. meeting in Geneva in early November, Washington opposed the convention, citing the need for free trade as its rationale. The subject is to be taken up again in another series of meetings in January. But cut-rate disposal costs and political heat at home will continue to provide incentives for U.S. firms to look south of the border. "It costs them from $250 to $300 per ton to dispose of wastes in the United States," says Wendy Grieder of the Environmental Protection Agency. By contrast, she notes, Guinea Bissau has contracted to accept wastes for $40 per ton. "Few of these countries have sophisticated laws or technical systems or the infrastructure to handle these wastes" properly, she adds.

EPA Inspector General John Martin, testifying before Congress in July, noted that firms have shipped hundreds of tons of toxic materials abroad without notifying U.S. government officials whose job it is to ensure that the countries which accept the waste will dispose of it safely. "Our review of the agency's program to control the exports of hazardous waste showed that the program needed major improvements," he said.

In 1980, 12 companies notified the EPA that they intended to export hazardous waste. By 1987, the number had grown to 465, and officials expect between 550 and 575 companies to engage in waste export in 1988.

The California firms Pott Industries and Teixeria Farms International formed the Guyana Resource Company (GRC) to build an industrial waste incinerator in Guyana to incinerate the two companies' waste industrial oil and paint sludges. While the Guyanese government initially expressed interest in the facility, it rejected GRC's application to build the plant. The rejection sparked the firm's decision, announced November 21, to pull out of the country, abandoning its $250,000 investment in the scheme. An angry President Desmond Hoyte went so far as to call the firms' owners "unscrupulous" in an interview this fall.

Belize also reportedly rejected the Pott/Teixeria plan in June.

As part of its lobbying, GRC hired American Environmental Audit, a California firm, to prepare a report it could use to sell the program. The report portrayed the incineration facility as a boon for everyone involved, but critics remain unconvinced. "I'm skeptical of any plan which seeks to take advantage of lax environmental regulations," says Jonathan Puth, an aide to Rep. John Conyers, D-Mich. "The basic question is if it's so environmentally sound, why not do it closer to home?" In the last Congress, Conyers sponsored legislation banning the export of any waste or sludge to any country, except Canada or Mexico. The bill is being rewritten to stiffen the proposed regulations and include Canada and Mexico. Under the new version, Puth says, "It would be a lot more difficult to export waste, if not an outright ban, which we would prefer ..." Conyers, in introducing the original legislation, had much to say on the issue. "Exporting waste abroad is the export of irresponsibility," he said, "the implementation of the credo, 'Anywhere but my backyard.' "We can only cause resentment toward the United States as long as we continue to use the Third World as our garbage dump."

A complementary bill introduced in the Senate would require all U.S. waste to be disposed of in compliance with U.S. environmental standards, regardless of the location of disposal. But even with stiffened regulations, corporations may still be able to find counterparts in developing countries to act as henchmen, some say.

Haiti's bitter experience with Philadelphia's garbage provides one example. Paolino and Sons, a Philadelphia-based company, paid the Liberian-flagged ship Khian Sea to haul away 13,476 tons of toxic incinerator ash in August 1986. Samples of the ash showed it contained arsenic, barium, cadmium, cyanide, lead, mercury and two different types of dioxins in concentrations ranging from 0.184 to 4.7 parts per billion, according to the environmental group Greenpeace. But the captain of the vessel signed a cargo declaration identifying the load as "non-toxic, non-hazardous, non-flammable incinerator ash."

A similar deal was tried in Honduras in March 1987. Amalgamated Shipping tried to sell toxic incinerator ash to the country as landfill for $22,000. The ash had originally been destined for dumping in the Bahamas, but the islands' government refused to allow the ship to unload in its territory. Similar proscriptions came from Bermuda, the Dominican Republic and Guinea Bissua A representative of Amalgamated Shipping told Honduran officials that the ash was "neither toxic nor dangerous, and is an excellent material for landfill in low-lying areas and swampy areas." The Honduran government, however, rejected the offer. -Diane K. Bartz

Boston Boycotts Shell

BOSTON MAYOR Raymond Flynn has issued an executive order barring the City of Boston from purchasing products from Shell Oil until Royal Dutch/Shell, its parent company, leaves South Africa. (See MM, September 1988.) "The best place to hit businesses is in the pocketbook," said Flynn in announcing the executive order. "We have to be consistent in our human rights stand and send a direct message to the South African government that we do not support the system of apartheid."

Flynn was joined at a press conference announcing the Boston boycott of Shell by Richard Trumka, president of the United Mine Workers of America, actor Ed Asner and Charles Laquidara, Boston's top-rated morning radio disk jockey. Trumka, who serves as co-chair of the National Labor Boycott Shell Committee, used the occasion to launch the Shell Boycott Media Campaign, which features radio public service announcements narrated by Asner, Jesse Jackson, actress Tyne Daly, singer Bonnie Raitt, musician Jackson Browne and artists from the rock groups Boston, Aerosmith and Heart, and other celebrities. The radio spots were premiered on Laquidara's morning show. Laquidara recently ran a three-month campaign called "Shell Shock" in which he asked listeners to boycott Shell products and mail in cut-up Shell credit cards. "Shell is the largest supplier of oil to the South African military," Laquidara noted. "South Africa doesn't have any natural oil resources, so Shell almost literally keeps the South African military running. That's why a boycott can be very effective."

The city of Berkeley, California, also recently passed a resolution declaring it "Shell Free." The Shell Boycott was launched in January 1986 and is supported by nearly 100 national labor, church, civil rights and anti- apartheid organizations. The boycott is active in 14 countries around the world.

(For more information, contact National Labor Boycott Shell Committee, c/o United Mine Workers of America, 900 15th Street, NW, Washington, DC 20005.)