Estimated Cost-Savings to the State of California and Its Municipalities from Passage of California Initiative 25-0022

California’s automobile accident litigation system is driving rising costs for government entities and taxpayers, while leaving accident victims with less than 60 to 70 percent of settlement payouts. 

A new economic analysis by BRG finds that the State of California (“State”) and its municipalities could see annual savings from the passage of California Initiative 25-0022 (“Initiative”) of at least $90 million and potentially as high as $250 to $300 million. Drawing on real-world insurance data and economic modeling, the study concludes that these savings will grow in subsequent years, potentially reaching $600 million annually by 2031. Cost-savings are expected for the State and individual municipalities within California, such as cities, counties, school districts, and other special districts, as well as transportation departments responsible for road design and construction.  

The study comes as California policymakers and local governments are dealing with rapidly rising litigation and liability costs tied to automobile accidents, which are placing growing pressure on public budgets. 

Key Findings from the Report

• Economic consequences of the current system: California’s automobile accident litigation system is driving increasing costs for the State, municipalities, and personal automobile owners while often failing to benefit accident victims themselves. Victims typically receive less than 60 to 70 percent of any litigation settlement due to high attorney fees, and some of them undergo unnecessary medical procedures that leave them with large bills they are unable to pay. Government entities—many of which are self-insured—are facing escalating payouts, higher insurance premiums, and growing legal expenses due to increased litigation and larger settlements. 

• Benchmarks from similar reforms suggest the Initiative could substantially reduce costs: Historical evidence from reforms similar to the proposed Initiative shows that claims, payouts, and insurance costs can be notably reduced. Drawing on California’s Medical Injury Compensation Reform Act (MICRA) and Florida’s 2023 HB 837 liability reform, the report finds that policies that curb excessive damages and litigation incentives have led to fewer lawsuits, lower claim payouts, and reduced insurance premiums. 

• Significant potential cost savings to the State of California and municipalities: Using government vehicle data and insurance industry benchmarks, BRG estimates the Initiative would lead to statewide savings of at least $90 million and potentially up to $250 to $300 million per year. The report estimates a reduction of 30 percent in litigated claims, 15 percent in severity of litigated claims, 7.5 percent in allocated loss adjusted expenses (ALAE), and 20 percent in insurance premiums, resulting in overall savings of $350 per vehicle. The Initiative would further cap attorneys’ contingency fees at 25 percent, safeguarding the recoveries of accident victims, and curtail abusive litigation practices, reducing non-meritorious litigation. 

• Limited impact on costs incurred by Medi-Cal: Any cost shifting to Medi-Cal would likely be limited and would not materially offset the projected savings from the reform. Most accident victims with valid claims would continue to pursue compensation through litigation rather than relying on Medi-Cal, and many individuals would not qualify for Medi-Cal coverage. Moreover, the State can recover costs from responsible third parties when Medi-Cal does pay for care. 

• Reductions estimated in personal auto insurance premiums: Reforms that reduce litigation abuse have been associated with broader stabilization and downward pressure on automobile insurance rates for all drivers, including personal policyholders. If the proposed Initiative passes, BRG expects a similar reduction in personal auto insurance premiums for policyholders in California.  

“California’s current automobile accident litigation system is driving significant and rapidly increasing costs for the state and its municipalities,” said Paul Wazzan, PhD one of the report’s authors. “The evidence is clear: litigation incentives and inflated medical damages are contributing to higher claim payouts and legal expenses, placing a growing burden on taxpayers. Reforms that standardize medical damages and limit excessive contingency fees would go far in preserving fair compensation for injured parties and substantially reducing costly litigation. Aside from this, a decline in traffic-related claims would also help reduce the significant backlog of other civil cases in the system, materially benefiting those using the state’s court system.” 

While the Initiative could result in short-term cost savings of up to $300 million, the report also highlights the expected longer-term benefits. The costs incurred by California and its municipalities to resolve automobile accident litigation have more than doubled over the past five years and are expected to grow rapidly in future years. On this basis, expected future cost-savings for the State and municipalities could reach as much as $600 million annually by 2031. BRG’s analysis illustrates the concrete opportunity the Initiative presents to significantly reduce the cost burden currently affecting government entities and individual policyholders across California.  

The authors were retained by Uber Technologies Inc. to conduct an independent economic impact study of the potential cost savings stemming from passage of California Initiative 25-0022.