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Fact Sheet on Insurance Commissioner Quackenbush, 1994-1998
Quackenbush and the 1994 Campaign for Insurance Commissioner
Quackenbush and Proposition 103 Refunds
- In May 1994, Quackenbush said in a press interview, "You can't take company money from [the insurance industry]. You regulate them. The conflict there is difficult to explain to the voters." He later went on to accept over $2.5 million from the industry for his campaign and has received $6.1 million from the industry since 1994.
- Quackenbush never mentioned the office of insurance commissioner in his television ads or mailings; he refused to participate in most debates and press interviews; and he relied almost entirely on the insurance industry for support. It was even revealed that employees of Allstate, calling voters to urge support for Quackenbush, identified themselves as representatives of police organizations.
- A state audit found that Quackenbush failed to report at least $100,000 in insurance industry contributions, did not properly detail $748,000 in expenses and omitted required background information of almost 40% of his individual contributors. The Franchise Tax Board audit found Quackenbush did not comply with disclosure and record-keeping provisions of the Political Reform Act. Quackenbush was ultimately fined $50,000 by the state's Fair Political Practices Commission.
Quackenbush and Earthquake Insurance
- Even after the courts ruled against industry challenges, Quackenbush cut numerous deals with insurers -- most of whom had contributed to his campaign -- on Proposition 103 refund checks, reducing the rollback amounts below the levels ordered by former Commissioner John Garamendi.
- In one instance, 20th Century Insurance Company's Proposition 103 rollback obligation was cut from $120 million to $46 million due to purported fiscal problems from the company's Northridge Earthquake losses. However, 20th Century was able to afford a $5,000 campaign contribution to Quackenbush's election campaign, a month after he had won office. In 1996, Quackenbush granted 20th Century the opportunity to re-enter the homeowner and earthquake insurance market. The insurer also contributed $100,000 to Quackenbush's Proposition 213 initiative that year.
Quackenbush and Insurance Rate Increases
- Quackenbush's California Earthquake Authority (CEA), threatens the largest financial asset of most Californians -- their homes -- by providing the insurance industry with a potential $39 billion dollar bailout in the event of a catastrophic earthquake. Homeowners purchasing CEA policies are forced to pay about twice as much for only about half the coverage available prior to the CEA. In February 1998, after a hotly-contested hearing held pursuant to Proposition 103, an administrative law judge found that the rates charged by the CEA are illegal and ordered the Authority to recalculate the rates. Quackenbush, however, has threatened to reverse the decision. Even the Department's own expert witness testified that the CEA's rates were at least 30% too excessive.
Quackenbush and the Department of Insurance Staff
- In February 1998, Quackenbush quashed a study on excessive auto insurance rates and profits by a task force subcommittee he himself appointed. By failing to complete regulations governing rates, Quackenbush continues to shield insurance company profits and allows companies to set rates without standards.
- Quackenbush has approved an average of nearly one rate increase request for every day he has been in office -- 1,002 rate increases through March 18, 1998 (1,172 days in office). This includes 122 increase approvals for personal earthquake insurance (32 of them for 100% or more!). One of these was a 100% increase for Allstate, which contributed $266,502 to his committees since 1994.
Quackenbush and Investigations
- Quackenbush appointed a transition team almost entirely of insurance industry representatives and appointed several insurance industry officials to high-ranking positions in his Department.
- At the suggestion of an industry "study" team, Quackenbush slashed staffing for key consumer functions within the Department, such as the units that handle consumer complaints against insurance companies and investigate insurance company misconduct. He then told insurance companies that the fees the Department charges them for investigations would be reduced due to the savings from the staff reductions.
Quackenbush and Legislation
- While investigating Surety Company of the Pacific for misconduct, Quackenbush accepted campaign contributions from the insurer -- in violation of state law. The FPPC is currently conducting an investigation into the matter. At one point, Quackenbush even abruptly halted the investigation of Surety Company after former Gov. George Deukmejian interceded on the insurer's behalf. Surety Company has contributed $29,500 to Quackenbush since 1994.
- Quackenbush has slashed insurer fines to as little as 8% of amounts originally levied by former Commissioner John Garamendi. For example, Commissioner Garamendi charged Ohio Indemnity with 427 violations of the Unfair Claims Settlement Practices regulations, which could have led to a penalty of $4.2 million. Quackenbush settled for $325,000.
Quackenbush and Long-Term Care
- Quackenbush supported legislation allowing the industry to engage in price-fixing prohibited by Proposition 103. Practices such as price-fixing and collusion have been estimated to cost consumers nationwide $65 billion annually, according to a report in 1996 by Money magazine.
- Quackenbush sponsored Proposition 213 on the November 1996 ballot. The poorly drafted initiative severely penalizes uninsured motorists, barring them from collecting pain and suffering compensation even if through no fault of their own they become the innocent victims of reckless drivers. Over 90% of funding for Quackenbush's initiative came from the insurance industry, which has bitterly fought and often flouted -- in at least one case, with Quackenbush's permission -- Proposition 103's requirements that would make it easier for those presently uninsured to obtain affordable coverage.
Quackenbush and Other Issues
- Quackenbush slashed long-term care insurance benefits below the level of disability payments required by state law. This action benefited a handful of insurance companies that sell such policies. These carriers have donated $300,000 to Quackenbush's campaign committees. Senior and consumer groups challenged the Commissioner's action in Court and in February 1997, a Los Angeles Superior Court judge overturned Quackenbush's approval of these reduced-benefit policies.
- Quackenbush has failed to issue regulations which would permit his Department to release information on consumer complaints against insurers. Then-Assembly Member Quackenbush voted for 1994 legislation which requires the commissioner to include only "justified" complaints in public data on complaints and to issue regulations defining "justified" before releasing that data publicly.
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