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home / insurance / press releases

NEWS RELEASE
Sep 17, 1998

Supreme Court Rejects Quackenbush - Insurer Plea to Revive Rate Increase Statute

Second Major Defeat for Insurer-Quackenbush Legal Team This Year
In yet another legal defeat for the alliance of Insurance Commissioner Chuck Quackenbush and the insurance industry, today the California Supreme Court denied review of the case of Proposition 103 Enforcement Project v. Quackenbush, making that case final.

In that case, a unanimous appellate court struck down as unconstitutional legislation sponsored by insurance agents that had the effect of reducing Proposition 103 rate rollbacks by millions of dollars.

"This is another landmark victory for consumers and another embarrassing defeat for the alliance of the insurance industry and the Commissioner," said Ed Howard, Senior Counsel for the Proposition 103 Enforcement Project and lead counsel in the case. "Once again, for the seeming umpteenth time, the judiciary has preserved the will of the electorate in enacting 103 against the Commissioner and insurance interests."

Proposition 103 requires that any amendment to it "further" the initiative's purposes. The amendment to Proposition 103 -- Senate Bill 905 -- was stricken by the appellate court because it raised rates and impinged upon the discretion of the Commissioner to fix rates under Proposition 103.

Premium taxes and agent's commission are paid as a percentage of premium; the higher the premium, the higher the tax and commission. SB905 increased rates for 1989, and thus decreased rate refunds for that year, by requiring that the agent's commissions and premium taxes paid by insurers on that portion of their rate that was unlawfully high to be passed onto policyholders, rather than absorbed by insurers.

Rather than join consumer groups and fight the amendment, Commissioner Quackenbush settled hundreds of rate rollbacks using the SB905 reduction, costing ratepayers millions of dollars.

Companies that will see their rate refunds increase include the state's largest insurer, State Farm, as well as other, smaller insurers.

This marks the second major defeat this year for the Quackenbush/insurance industry legal team. Just a few days ago, an Alameda Superior Court judge ruled against State Farm and the Commissioner and held the Commissioner's good driver regulations to violate Proposition 103's anti-redlining provision.

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