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SACRAMENTO, Calif. -- California's laws are written in the Capitol or at the ballot box, at least according to the textbooks. But often -- much to the chagrin of lawmakers, the governor and even voters -- they are rewritten in the courts. That happened with state laws dealing with welfare, abortion, state worker pay, budgeting and myriad other issues. Now it's happening again, this time with a pocketbook issue that affects millions of Californians -- automobile insurance.

Eighty miles southwest of Sacramento in an Alameda County Superior Court, a judge is considering issuing a final decision on the legality of a key Insurance Department regulation that governs the way companies charge their customers for auto coverage.

Insurance may not be the most exciting political issue in Sacramento, overshadowed perhaps by schools, crime, the budget and political campaigns. But it is profoundly important, and to Capitol insiders insurance-related issues are viewed as the driving force behind much of the Capitol's infighting. High-stakes battles over workers compensation insurance, earthquake coverage and homeowners insurance all have taken their toll.

Auto insurance, in particular, is a multibillion-dollar issue and of prime importance to California's 20 million-plus motorists.

Insurance Commissioner Charles Quackenbush and his department say the regulation follows the requirements of Proposition 103, the insurance-reform initiative approved by voters a decade ago. They also say the regulation makes a fair connection between cost and risk, enabling companies to charge high-risk customers more while charging good drivers less.

Insurers generally agree, saying that risk-based pricing is the only sound way to offer coverage.

But a broad coalition of consumer, civil rights and three cities -- San Francisco, Los Angeles and Oakland -- disagree. They say the regulation allows insurers to use ZIP codes to discriminate against inner-city drivers, and they challenged the regulation in Judge Henry Needham's court.

Judge Needham, siding with the challengers, issued a preliminary ruling in June. Now, the parties are waiting for him to issue a final decision. It's already overdue, and each day is tense indeed at the Insurance Department as they await Needham's ruling.

Insurers contend that any law arbitrarily forcing them to charge one class of drivers less will result in higher charges for other drivers. That means that inner-city drivers could see their rates drop, but drivers in lower risk, rural areas could see a boost in rates.

The challengers, of course, disagree, saying the companies already enjoy substantial profits and fairness requires them to treat inner-city motorists with good driving records just like good rural drivers.

Quackenbush, apparently expecting the worst from Judge Needham, took the unusual step last week of announcing he would appeal the ruling -- even before Needham has ruled. His office said the notice of appeal was filed in order to meet a procedural deadline in case Needham's ruling is further delayed.

That means that whatever the judge decides, the case will not soon be resolved but will ascend to a higher court, where months of new legal wrangling is all but certain.

For voters who thought they decided the issue in 1988 when they approved Proposition 103, this must all come as a surprise. But it is no surprise at all to those who follow life in the Capitol: Half the battle is passing a law, the second half is testing it in court.

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