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Los Angeles Times
May 13, 1999
by Virginia Ellis
Quake Insurance Squabble Splitting Along Party LinesSacramento-- After months of behind-the-scenes sparring, state Treasurer Phil Angelides is forcing a showdown with Insurance Commissioner Chuck Quackenbush over control of the state agency that provides earthquake coverage to nearly 1 million California homeowners.
Democrat Angelides has called a meeting today of the California Earthquake Authority board, upstaging Republican Quackenbush, who heads the three-member panel and is empowered to schedule its sessions.
Angelides said he took the unusual step because Quackenbush has repeatedly rebuffed his requests for a meeting, a move some Democrats interpret as an attempt to keep them from exercising control over the board.
The insurance commissioner and treasurer sit on the board with the governor. Until this year, the panel was controlled by Republicans, but that changed when Democrats won the governorship and the treasurer's office in the November election.
Quackenbush has not called a meeting since December, leaving the agency to be run without board oversight by Chief Executive Officer David Knowles, a former Quackenbush deputy who was selected for the job by the old Republican-dominated board.
Dana Spurrier, a spokeswoman for Quackenbush, declined to say Wednesday why the commissioner had not complied with Angelides' repeated requests. She said Quackenbush intends to send a representative to the meeting and will not challenge the decision to call it.
"Our staff is looking forward to participating and working with the new board members," she said.
Even so, the tension between Angelides and Quackenbush signals potential instability in an agency that relies heavily on outside investment to maintain the reserves it needs to cover policyholders.
Relations between the two men were already strained when Angelides took office, because of Quackenbush's involvement in a eleventh-hour move by the old Republican board to give Knowles a four-year contract to head the agency. Angelides said the new board should have made the selection.
The authority was created in 1996 by the Legislature, which was under pressure from big insurance companies to relieve them of their exposure to earthquake losses.
The Northridge earthquake had required an unprecedented $ 15 billion in damage payments, pushing some companies to the edge of bankruptcy and forcing others to withdraw from the California market.
The state-run agency took over the responsibility for providing earthquake coverage, but it still depends on large investments from the industry and the industry's willingness to help cover the agency's risk.
As a new member of the board, Angelides believed that it was important to be brought up to date on the activities of the agency, said state Deputy Treasurer Cathy Calfo.
"This is an urgent request that you take action today to notice a meeting of the governing] board of the authority ," Angelides wrote Quackenbush on May 3. "If, by 4:30 p.m. today, I have not received confirmation that you will notice the meeting, I will have no option but to notice the meeting myself."
Calfo said Angelides never got a reply from Quackenbush to that letter or two previous ones seeking a meeting. Nor, she said, had the commissioner returned the treasurer's phone calls.
Calfo said Knowles offered a private briefing, but Angelides declined, believing that the board should meet in public.
"It is a little stunning that it has taken this long for there to be a meeting," she said. "The treasurer takes very seriously the job of overseeing nearly a million policies that protect taxpayers' most valuable asset--their home."
Doug Heller, staff advocate for the Foundation for Taxpayer and Consumer Rights, said the absence of public meetings has kept consumers in the dark about the agency's management. He said that may be one reason earthquake insurance premiums are high.
"We are paying double the premiums and getting half as much," he said. "People just aren't buying earthquake insurance because it just isn't worth it, and that potentially could be dangerous when the next big quake hits."
Since December 1996, the number of homeowners buying earthquake insurance has dropped from 1.3 million to 940,000.
But Jerry Davies, a spokesman for the Personal Insurance Federation, which represents the industry, said the earthquake authority has given homeowners protection that the private market can no longer afford to provide.
"It is expensive, but the fact is, if you look at the alternative, it's no insurance at all," he said.
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