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home / insurance / in the media

Sacramento Bee
Aug 07, 2000

by Emily Bazar

Full slate at Capitol as recess concludes: Bills seek to mop up after Quackenbush

When state legislators return today from their monthlong summer break, they face many hundreds of bills and a fast-approaching Aug. 31 deadline to act.

At least five of the proposals are directly inspired by the scandal that has enveloped former state Insurance Commissioner Chuck Quackenbush, and at least two more are expected to be introduced today.

If passed, they could dramatically change how the Insurance Department is run and how insurance companies are regulated. But none is a sure thing.

A measure that would allow Californians to decide whether the insurance commissioner should be appointed, not elected, is essentially dead. Another, which would prohibit campaign contributions to the insurance commissioner by insurers, faces stiff opposition.

Despite the barriers, consumer advocates and some politicians see these last few weeks of the session as an opportunity to enact legislation protecting consumers and preventing another scandal from rocking the department.

"We're saying in effect that policyholders were not treated right in this case," said Assemblyman Jack Scott, D-Altadena, whose AB 481 would require that any settlements between insurers and the Insurance Department provide restitution to policyholders. "There ought to be certain safeguards so the consumer, the policyholder and the state of California can be protected."

Quackenbush, who resigned from his post as commissioner July 10, came under fire for his department's handling of claims resulting from the 1994 Northridge earthquake. Rather than collect fines for insurance company wrongdoing, the department settled with insurers, funneling millions of dollars into department-created nonprofit foundations. Those foundations paid for polling, public service announcements and other activities that aided Quackenbush politically.

Last week, Democratic Gov. Gray Davis appointed Harry Low, a retired state appellate court justice, as the new commissioner. If confirmed by the Legislature, Low would serve the rest of Quackenbush's term, through 2002.

But consumer advocates insist that replacing Quackenbush isn't enough.

"The downfall of one administration does not solve the problems of thousands of earthquake victims who received no settlements or poor settlements," said Doug Heller of the Foundation for Taxpayer and Consumer Rights.

A handful of state politicians agree, and they have come forward with legislation this session to address issues that have surfaced in recent months:

Sen. Jackie Speier, D-Daly City, offered SB 2107, which would limit the scope of the insurance commissioner's authority over settlement or administrative actions. The bill would not allow the commissioner to approve settlements unilaterally, or allow insurance companies to contribute to nonprofit groups instead of paying regulatory fines.

SB 953, by Speier, which is expected to come before the Assembly Elections, Reapportionment and Amendments Committee today, would ban campaign contributions to the commissioner by insurance companies. It faces opposition internally and from insurance companies.

Senate leader John Burton, D-San Francisco, introduced SB 1899, which would provide victims of the Northridge earthquake an additional year to file claims for their quake-related damage. It has been approved by the full Senate and awaits action in the Assembly. A bill by Speier, SB 622, also pertains to the statute of limitations in cases of earthquakes, but isn't limited to Northridge.

Sen. Liz Figueroa, D-Fremont, is expected to introduce SB 1524 today. Among its provisions, it would prohibit use of the commissioner's name, likeness or voice in public outreach advertising when the ads are paid for with funds from department enforcement activities.

Speier proposed a constitutional amendment, SCA 19, that would allow voters to decide whether the insurance commissioner should remain an elective position or become appointed. It was defeated in committee.

Burton was one of the members who voted the measure down in the Senate Constitutional Amendments Committee.

"I think people have a right to go to election and maybe elect a different kind of commissioner," Burton has said.

Outside of the Capitol, Californians tend to agree and think the choice of commissioner is best left to them. The governor's pollster, Paul Maslin, said Californians don't like to give up a voting right, even in extreme cases.

"I think voters would say, 'Fine, Quackenbush didn't work out ... but let's get it right the next time,'" Maslin said.

But Speier believes true reform in the Insurance Department won't happen until dramatic steps are taken.

"We've got to put the department back on track and place a clear focus on balancing the interests of the insurers and the interests of the consumers," Speier said.

"If we're committed to reforming that department and making it operate in the public's interest, we have to make the commissioner an appointed position or ban contributions from the people the commissioner regulates," she said. "It's black and white."

It's not black and white to insurance companies, which oppose several of the bills, including Speier's measure that would ban contributions from insurers.

Insurance officials argue that banning contributions to a certain candidate unfairly restricts their freedom of speech because "like any other institution or organization, (insurance companies) are entitled to back the candidate they think is best qualified," said Janine Gibford, a lobbyist for the Association of California Insurance Companies.

Gibford called Speier's bill and other proposed legislation a "premature" reaction to the media focus on Quackenbush.

"Whenever you have something that's this big, there's always a few knee-jerk reactions ... that come across in the form of legislation," Gibford said.

Knee-jerk or not, it continues. Even at this late date, lawmakers will be introducing new legislation. Sen. Martha Escutia, D-Commerce, has agreed to take up an "Insurance Policyholder Bill of Rights." At the urging of consumer groups, the bill is expected to focus on insurance carriers and will include such provisions as requiring that all market-conduct examinations of insurance companies be public.

Some politicians who aren't ready to act now are thinking about the next term.

Assemblyman Darrell Steinberg, D-Sacramento, for instance, wants to amend the existing whistle-blower statutes to ensure that government attorneys can come forward if they see wrongdoing without risking the loss of their bar license, a quandary one Insurance Department attorney now faces.

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