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home / insurance / in the media

Associated Press
Jun 02, 2000

by John Howard

Quackenbush investigators issue 20 more subpoenas

Insurance officials called to testify next week; request by commissioner for access to related files was denied
SACRAMENTO -- Lawmakers investigating Insurance Commissioner Charles Quackenbush issued at least 20 subpoenas Thursday forcing witnesses to testify and rejected his request for records linked to the probe.

The subpoenas require the witnesses -- including insurance department officials -- to appear before the Democrat-run Assembly Insurance Committee, which plans three days of hearings next week.

Also subpoenaed were public relations and political strategists. Several other witnesses plan to appear voluntarily.

Quackenbush, a Republican, was not subpoenaed by the Assembly. The commissioner has testified before the Assembly committee before and was subpoenaed by the Senate to appear Monday before its insurance committee -- the same committee Quackenbush shunned last week.

Also Thursday, Sacramento Superior Judge Joe S. Gray said he would rule by late next week on a Senate subpoena seeking "market conduct exams," reviews of companies' claims-handling practices conducted by Insurance Department investigators.

At issue are exams covering a half-dozen insurers who handled hundreds of thousands of claims stemming from the January 1994 Northridge earthquake. Critics contend the exams show widespread claims-mishandling by insurers; the insurers have denied claims were mishandled.

The exams are critical because they detail alleged violations entailing more than $3 billion in potential penalties. In lieu of those penalties, however, the commissioner persuaded the companies to donate a far smaller amount, about $12 million, to a nonprofit fund he set up.

The money in the California Research and Assistance Fund was intended to be spent to help consumers and finance quake research. Much of the money, however, has been spent on public-service ads featuring the commissioner or donated to groups with no connection to earthquake issues.

Attorneys for the Insurance Department, joined by lawyers for State Farm, Allstate and the Association of California Insurance Companies, contend the exams should not be disclosed and that policyholders' privacy should be guarded.

Legislative lawyers contend the records should be released to enable lawmakers to perform effective oversight of the department.

Meanwhile, Quackenbush's request for documents under the Legislative Open Records Act was rejected across the board.

The commissioner demanded the documents, including e-mail, reports, studies, photographs and other paperwork from the Senate and Assembly insurance committees and an array of staffers. Quackenbush believes the documents support his contention that he is the victim of a political witch hunt.

Quackenbush spokesman Dan Edwards did not respond to a request for comment Thursday evening.

The Legislature's lawyer, Bion Gregory, said Quackenbush's request targeted materials exempt from disclosure.

"The raw investigative files of committees of the Legislature are expressly exempt from public disclosure," Gregory wrote to Sacramento attorney Thomas Hiltachk.

Hiltachk said Gregory's letter showed the probe of the commissioner was tainted by politics.

"This is plain 'hide-the-ball.' That's not oversight, that's an ambush," said Hiltachk, who has been privately retained.

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