Calif. Appeals Quackenbush Settlements

By Daniel Hays

NU Online News Service, Jan. 14, 1:26 p.m.EST?California Insurance Commissioner John Garamendi, inan action that once again pits him against insurers, went to courtyesterday to overturn a settlement with carriers for their handlingof earthquake claims.

The action was filed in the Court of Appeal 2^ndDistrict of Los Angeles seeking a reversal of what Mr. Garamendi, aDemocrat, said was "a sweetheart deal" engineered by ChuckQuackenbush, the Republican commissioner who was forced out ofoffice in 2000.

Mr. Garamendi, before he made an unsuccessful bid for thegovernorship, had a term as commissioner that ended in 1994, whichsaw him in frequent court battles with insurers over the handlingof Proposition 103 insurance cost rollbacks.

Mr. Garamendi's announcement of the appeal comes only two weeksinto his latest term.

The contested settlements approved by Mr. Quackenbush wererelated to alleged mishandling of policyholder claims from theNorthridge earthquake.

Insurers, who were accused of low balling claims and makingshoddy inspections, agreed to pay $12 million into two nonprofitfunds to be used for a public safety earthquake campaign, ratherthan pay fines or make restitution to consumers.

Mr. Quackenbush was forced from office after it was alleged thatfunds' money was being used to foster his political campaignefforts.

A previous challenge of the settlements brought by Mr.Quackenbush's replacement, Republican Commissioner Harry W. Low,was denied in Superior Court.

A spokesperson for the Alliance of American Insurers in DownersGrove, Ill. said the Commissioner's move was a disappointmentbecause his action would create uncertainty in the marketplaceamong insurers who thought the issue was "finished and donewith."

Mr. Garamendi announced he was acting because, "Californiaconsumers were betrayed by Chuck Quackenbush. The sweetheart dealshe made with insurance companies to settle alleged mishandling ofclaims shortchanged earthquake victims.

"I owe it to the Northridge victims to ask the Court of Appealto review the decision and set aside those agreements. To doanything less only serves to make them victims again."

A spokesperson for the department, Nanci Kramer, said thedepartment takes the position that the settlements violated publicpolicy because they went beyond the scope of the commissioner'sauthority.

Mr. Garamendi said the settlements effectively deny thedepartment an opportunity to review and properly address consumercomplaints.

The Northridge earthquake was one of the largest insured lossevents in U. S. history with more than $12.5 billion in totallosses. Insurers named in the appeal include 21^stCentury, Allstate, State Farm, Farmers and Fireman's Fund.

Allstate spokesman Bob Daniels said, "We agree with the SuperiorCourt's ruling. We believe the settlement agreement betweenAllstate and the department was valid and enforceable contractunder California law and Allstate complied fully with the terms andconditions of that contract."