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NEWS RELEASE
Jun 28, 2000


CONTACT: Doug Heller - 310-392-0522 x309

QUACKENBUSH RESIGNS: "Independence Day" For California Consumers

Scandal Not Over; Governor Must Appoint Consumer Protector
Los Angeles -- Consumer advocates hailed the resignation of Insurance Commissioner Chuck Quackenbush today. In a news conference now available on the Internet, Harvey Rosenfield, President of FTCR and the author of Prop. 103, which made the insurance commissioner an elective office, said: "For six years, California consumers and policyholders have been subject to the tyranny of the insurance companies and their lackey, Chuck Quackenbush. Today is 'Independence Day' for the People of California."

But the advocates emphasized that the scandal which engulfed Mr. Quackenbush is not over with his resignation. It won't be over until the insurance companies' handling of claims of Northridge earthquake victims are properly investigated and state laws are changed to prevent such scandals in the future. The group said Governor Davis must appoint an acting insurance commissioner to fill out the remainder of Quackenbush's term who is committed to protecting the consumers of the state.

"Mr. Quackenbush's resignation doesn't mean the scandal is over -- it won't be over until the insurance companies' handling of claims of Northridge earthquake victims are properly investigated and justice is done, which can only be assured if Governor Davis appoints a pro-consumer commissioner to serve the balance of Mr. Quackenbush's term, and state laws are changed to prevent such scandals in the future," Rosenfield said.

Qualifications for New Commissioner Listed; Citizen Groups Will Recommend Candidates to Governor

Who becomes Insurance Commissioner next is an extremely crucial matter to the state's consumers and taxpayers. Under Article V, Section 5 of the California Constitution and Section 12900 of the Insurance Code, the Governor must appoint a person to serve the balance of Mr. Quackenbush's term, which is over in November 2002. Consumer advocates, wary of appointees, said that citizen groups would send a list of recommended candidates to the Governor.

"The elected office of insurance commissioner was borne out of the voters' anger at the failure of gubernatorial appointees to properly protect the public against excessive profiteering and other abuses by insurance companies. To restore public confidence in the Department of Insurance, the next commissioner must be someone who has never taken a penny from the insurance companies, either as an employee or an elected official; if an elected official, someone who has voted to protect consumers rather than the insurance industry; someone who will respect and defend the will of the people, and someone whose sole concern is the protection of the consumers and policyholders of California, for, as we all know, the insurance industry is more than capable of defending itself," stated Doug Heller, FTCR advocate.

"There are a limited number of people who fit the qualifications for this appointed office. We will join other citizen groups in providing the Governor a list of recommendations for whom to appoint."

Investigation Must Continue

The consumer advocates said that Mr. Quackenbush's departure will not end the scandal. They said that the new commissioner's first step must be to re-open the investigations of the insurance companies' handling of the Northridge claims. To the extent that litigation has not resolved outstanding claims, the new Commissioner should step in to protect those policyholders victimized by the insurance companies. The Commissioner must also determine what remedial actions, including fines and penalties, the insurance companies must be ordered to make. The advocates noted that the settlement agreements signed by Mr. Quackenbush do not prevent the agency from re-opening investigations and issuing any necessary orders.

"No doubt the insurance industry hopes that with the departure of Mr. Quackenbush, the investigation into the Northridge scandal will evaporate. It cannot: the Department of Insurance, the Legislature and the Attorney General must get to the bottom of what happened to policyholders, and take appropriate action," said Rosenfield.

As for Mr. Quackenbush, Heller said: "Mr. Quackenbush always said he was tough on crime. He should be held to that position. Those who engaged in criminal activity should be prosecuted."

New Insurance Protection Laws Needed

Another by-product of the scandal, which included disclosure of widespread low--balling, misrepresentation and other abuses by State Farm, California's largest insurance company, and other insurance companies, must be new insurance protection laws.

"Obviously, current laws are insufficient to protect the public against the greed of the insurance companies, which earn huge profits by investing our premiums and therefore have a powerful incentive to delay or deny claims," said Douglas Heller. "To restore integrity to the insurance marketplace, California lawmakers must enact new laws that protect consumers by requiring insurance companies to pay all legitimate claims fully and fairly."

Legislature's Handling of Scandal "Shows the System Works"

Finally, FTCR said the California Legislature's handling of the scandal deserved voters' appreciation. "The Assembly Insurance Committee, led by Jack Scott, has conducted a model inquiry: thorough, expert and bi-partisan. And by making public a portion of the secret CDI reports that exposed the insurers' abusive practices, Senate leader John Burton and Senator Martha Escutia provided the public and lawmakers with crucial information by which to judge the validity of the settlements Quackenbush made with the insurance companies."

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