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home / insurance / in the media

Sacramento Bee
May 02, 2000

by Patrick Hoge

Bill seeks to seize Quackenbush fund for quake victims

Two state legislators want to seize $6 million from a nonprofit foundation Insurance Commissioner Chuck Quackenbush created through insurance settlements and give the money to victims of the 1994 Northridge earthquake.

Assemblyman Jack Scott, D-Altadena, and Assemblyman Thomas Calderon, D-Montebello, also are introducing a bill, AB 481, to require that all future fines or penalties from insurance settlements must go to the policyholders who were mistreated.

Scott and Calderon sit on the Assembly Insurance Committee, which last week held a hearing into Quackenbush's decision to settle misconduct allegations of misconduct by six insurance companies by requiring them to pay $11.6 million into the California Research and Assistance Fund, a nonprofit foundation with loosely stated goals.

Department officials had originally proposed more than $3 billion in fines for four of those companies.

None of the settlement money has gone to quake victims, but millions went into public service announcements and TV ads that featured Quackenbush.

"I am introducing legislation to prevent this disgraceful situation from recurring," said Scott, the chairman of the Assembly Insurance Committee, who has promised to hold several more investigative hearings. Also probing Quackenbush's conduct are the Senate Insurance Committee, the state Attorney General's Office and the Fair Political Practices Commission.

Quackenbush's office declined to state a position on AB 481. Department of Insurance spokesman Scott Edelen did say, however, that the bill bolsters Quackenbush's stance that current law inappropriately gives regulatory fines to the Legislature to spend however it wants.

"The proposed legislation by Mr. Scott (and Calderon) is a welcome validation of commissioner Quackenbush's contention that consumers should be the primary benefactors of sanctions imposed on insurance companies, rather than the black hole of the state's general fund," Edelen said.

Calderon countered that Quackenbush's approach also did nothing for policyholders.

"If he (Quackenbush) believed that, why didn't he come to us with legislation rather than set up a foundation that doesn't in fact benefit earthquake victims?" Calderon asked.

In addition to their legislation, Scott and Calderon have asked the Legislative Counsel's office whether state lawmakers have authority to break a contract with the nonprofit agency in order to obtain the remaining money. The lawmakers said they are not seeking to recover any money the foundations have already spent.

The Legislative Counsel has already said Quackenbush did not have legal authority to allow the insurers to avoid fines by contributing to a foundation, a stance Quackenbush disputes.

Quackenbush has already asked the foundation to expedite approval of a plan to distribute what he had intended would be a $6 million relief fund.

Among other donations, the California Research and Assistance Fund gave $500,000 to help build a new headquarters and job training center for the Greater Sacramento Urban League, whose board of directors Quackenbush joined last year.

It also gave $25,000 to the Meadowview Community Association, $10,000 to the Northern California Reinvestment Consortium and $263,000 to the Roseville-based Skillz Football Camp, which Quackenbush's two sons attended.

Quackenbush has offered varying reasons for establishing the California Research and Assistance Fund. Last week, he testified before Scott's committee that his intent was to create an "effective, innovative" way to return money to victims as directly and quickly as possible.

Quackenbush defended the idea of encouraging companies to contribute to nonprofit foundations, saying the public benefited without the cost of litigation.

He did acknowledge, however, that "mistakes were made," particularly regarding how money was spent by the foundation's board of directors, which is by law independent of Quackenbush and the department.

Indeed, top Quackenbush aide George Grays resigned amid allegations that he was personally handling foundation business from the insurance commissioner's office.

Doug Heller, a spokesman for the Foundation for Taxpayer and Consumer Rights, praised Scott and Calderon's bill as forward-looking, but he said it should not get in the way of punishing Quackenbush if he acted improperly.

"Right now we need to focus on Mr. Quackenbush's actions," Heller said, "and the insurance company behavior that he has apparently covered up."


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