The policy issue behind the hubbub surrounding the secret recordings made by Jerry Brown’s ex-spokesman stretches back to 1984, when Gov. George Deukmejian signed California¿s proof of auto insurance law, making it easier to cite someone for driving uninsured.

In 1985, civil rights and community groups sued to challenge the law, arguing that insidious industry practices prevented many citizens from complying. The California Supreme Court acknowledged the severity of the problem, but ruled that the groups needed to seek a legislative, rather than judicial, fix.

Justice Allen Broussard, in a concurring opinion, focused on one of the worst practices: the use of prior auto insurance coverage as a basis for denying or surcharging a customer.

A 2005 court ruling on the subject summed up Broussard’s view: ” Justice Broussard noted two practices were widespread in the insurance industry prior to Proposition 103’s passage: prohibitively high insurance rates for the previously uninsured driver, and the exclusion of uninsured drivers from the insurance market altogether simply because they were not previously insured – Such practices arbitrarily penalized uninsured motorists, leaving many unable to comply with California’s mandatory insurance laws.”

When Californians enacted insurance reform with Proposition 103 in 1988, voters prohibited auto insurers from considering prior insurance coverage. Now, two decades later, Mercury Insurance, California’s third largest auto insurer, wants to reestablish the costly and unfair practice.

Its proposed initiative would override Proposition 103’s prohibition, allowing companies to base premiums on whether or not a driver has been continuously insured. Mercury’s public relations team claims it will give discounts to people who’ve had continuous auto insurance; they refuse to acknowledge that it also will allow rate increases on struggling families with a lapse in coverage.

That is exactly what Mercury was doing illegally until the Department of Insurance and a class action lawsuit stopped them several years ago. It is exactly what they wanted in 2003, when they sponsored legislation virtually identical to the current initiative; the courts tossed that law because it allowed insurers to raise rates on people simply for having a lapse in coverage.

It is also exactly how the company prices policies in states without California’s protections. It’s worth noting that you don’t have to have been driving uninsured to face the no-prior-coverage penalty proposed in Mercury’s initiative. If you lost your job and sold the car, had surgery and stopped driving, or used public transportation exclusively for a time, you would pay hundreds of dollars more than someone who’d been “continuously covered” if you ever need insurance again.

Back in August, the Attorney General correctly described an earlier version of Mercury’s initiative, saying it would allow insurers to raise or lower premiums based on any lapse in coverage. A Brown campaign donor, Mercury disliked that, because initiatives allowing higher rates don’t do well with voters.

The company withdrew that proposal and resubmitted it with cosmetic changes. Lawyers in Brown’s office told me they were under intense pressure to change the Title and Summary, and Brown’s office accommodated: The new title and summary only mentions “discounts,” not the premium increases the proposal would allow for millions of Californians.

It’s bad enough getting a Title and Summary wrong; glossing over the ugly part of Mercury’s initiative is more egregious for the AG, because he wrote it fairly the first time.

Brown’s lawyers claim the two versions are different: the first, they say, explicitly struck the Prop. 103 provision prohibiting prior coverage discrimination, while the new version didn’t. They don’t mention that the new version clearly says it would take effect “notwithstanding” the no-discrimination provision of 103. Nor do they note that the Mercury-sponsored, invalidated 2003 law allowing surcharges didn’t strike the provision either.

Comments by AG lawyers in the taped interview with a reporter show they defaulted to legal obfuscation when asked about the issue: “I don’t want to say anything… that will end up in a lawsuit,” and “we don’t have a crystal ball” about how a court would rule on the key question.

The quotes come from the secretly recorded interview Brown’s ex-spokesman used to try to kill a story about the AG’s flip-flop. The rest is recorded, er, on the record.

Doug Heller is executive director of Campaign for Consumer Rights, the campaign affiliate of Consumer Watchdog.