Table Set In Calif. Commissioner's Race
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Insurance Chronicle
Mar 11, 2002

by Matt Brady

Table Set In Calif. Commissioner's Race

California's first elected insurance commissioner, John Garamendi, took an important step towards returning to the office last week, beating out both a current and a former member of the State Assembly for the Democratic nomination. Garamendi will now square off against Los Angeles businessman and Republican nominee Gary Mendoza, and the oddsmakers have crowned him the favorite.

"It's an office that needs serious rebuilding," said Garamendi. "I'm very anxious to get it back on the track of protecting consumers, not insurance companies."

Garamendi received 38.5% of the vote, beating out his closest rival, former state assemblyman Tom Umberg by more than 10% of the vote. State Assembly insurance committee chairman Tom Calderon, who had been portrayed by Garamendi, Umberg and some consumer groups as the industry's candidate because he accepted donations totalling $1.5 million from insurance industry related groups placed third, receiving 23.1% of the vote.

"California voters rejected the insurance industry's attempt to take over the Dept. of Insurance," said Doug Heller, a spokesman for the Foundation for Taxpayer and Consumer Rights. "Not only did that candidate lose, he didn't even come in second." Heller said the group was hoping that both Garamendi and Mendoza will voluntarily forsake donations from insurance industry sources, and cautioned them to learn from the example of the primary. "The lesson here is that insurance industry money is poison," he said.

With the two main candidates set, the industry is hoping that the voters will now focus on their differences in policy, rather than image. "We're looking forward to a spirited debate," said Nicole Mahrt of the American Insurance Association. "We hope that debate will center on the important issues, and that it will not be a race that's personality driven."

Even before the vote was taken, whomever came out of the Democratic primary was widely considered to have the edge heading into the home stretch, as Republicans will continue to pay the political price for the scandal that ended the term of the previous elected insurance commissioner, Chuck Quackenbush, prematurely. Considered to be a rising star in state politics, Quackenbush resigned from his post amidst allegations that he did not follow up on consumer complaints after the Northridge earthquake of 1994 in exchange for donations made by insurance companies into a special fund used to pay for ads promoting his political aspirations. The matter has been investigated on both state and federal levels, and officials from the U.S. Attorney's Office recently said no charges would be filed against the former commissioner. After Quackenbush's resignation, Gov. Gray Davis appointed former appellate judge Harry Low to the position. Low announced last year that he would not seek election for another term.

Garamendi, Quackenbush's predecessor as commissioner, has also been the subject of controversy since his prior term in the office. In 1991, he seized troubled insurer Executive Life, and subsequently sold off its investment portfolio to French bank Credit Lyonnais amid allegations of secret deals. Recent reports that the bank is set to make a deal with the federal government in the matter caused Low and State Attorney General Bill Lockyer to write a letter asking U.S. Attorney General John Ashcroft to release all documents pertaining to the federal investigation of the matter if a settlement is moving forward. For his part, Garamendi has said that 92% of Executive Life policyholders were completely reimbursed.

According to Heller, the Credit Lyonnais scandal appeared to have little effect on Garamendi's campaign. "I don't think that it impacted the voters," he said. "that issue has been reviewed, and it doesn't seem to stick. Heller said the Foundation would continue to monitor the investigation into Credit Lyonnais, but that he has been told that Garamendi, "wasn't particularly culpable."

Mendoza, director of the Dept. of Corporations under former Gov. Pete Wilson, defeated former Huntington Beach City Council member and insurance agent Wes Bannister and Stefan "Watchdog" Stitch. Stitch legally changed his middle name to "Watchdog" in December.

Copyright c 2002 Thomson Media. All Rights Reserved.

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