Insurance Commissioner Hedges on State’s Defense of Prop. 103

California Insurance Commissioner Roxani Gillespie repeatedly refused on Wednesday to commit herself to a vigorous legal defense of Proposition 103’s popular but controversial 20% premium rate roll-back provisions, as she was grilled by senators in the second of three state hearings on implementation of the insurance reform initiative.

Gillespie, in sometimes heated exchanges with the lawmakers, also refused to take a stand on who should lead the state’s defense in the pending Supreme Court case: the attorney general, who has requested that the proposition be allowed to take effect immediately, or the governor’s personal legal adviser, who recently sided with the insurance industry in asking the high court to hold the entire measure in abeyance.

“We do not make policy decisions without checking with the governor,” said Gillespie.

Later in the day, a spokesman for Gov. George Deukmejian also declined to take a public position of defending the rollbacks. “I can’t tell you what will be incorporated in the governor’s brief” to the Supreme Court, spokesman Kevin Brett said.

“This is a slap in the face of every voter in the state,” said Harvey Rosenfield, author of Proposition 103. “The will of the people should be presumed to be constitutional” and should be aggressively defended, he said.

Proposition 103 has been challenged in a series of lawsuits brought by insurance companies questioning the measure’s constitutionality. The Supreme Court has agreed to hear the case and agreed with insurers to place a stay on the roll-back provisions.

Sen. Alan Robbins (D-Van Nuys), who chaired the hearing, told Gillespie that “under Proposition 103 you have authority and responsibility. . . . You can come down on the side of the electorate or in defense of the insurance companies. You are going to have to take a position and take it publicly.”

He said that the legislative counsel has given him a “preliminary, oral opinion” that says the insurance commissioner no longer can be fired by the governor.

“You’ve been given a declaration of independence,” said Robbins. “You are no longer subject to the old rules. You’ve been liberated . . . and now you can take a position.”

But Gillespie held firm. “I am part of the Administration, I belong to the executive,” she said. Brett, the spokesman for Deukmejian, said that the legislative counsel’s opinion “obviously does not have the force of law. And, he said, the insurance commissioner is appointed to a four-year term and cannot be fired anyway.

Gillespie later gave some ground to the senators, however, when goaded to take quicker action against Travelers Insurance. Robbins and other senators said the company is openly breaking the law by refusing to renew auto policies.

Gillespie agreed that the company’s decision not to renew any auto insurance policies was, in her opinion, unlawful under Proposition 103.

But she argued that she was dealing properly with the situation.

“I don’t see this as a very horrendous debacle for the people of California,” said Gillespie about Travelers’ decision. The company insures only about 25,000 California motorists, or less than one-half of 1% of all insured drivers.

She said company officials have been notified of her opinion, they have responded and she planned to issue a cease-and-desist order in early 1989. “It is always possible for companies to change their minds,” said Gillespie. “We always give people a chance to change their minds.”

That answer was not good enough for Robbins and Sen. Cecil Green (D-Norwalk), who tore into Gillespie for dragging her feet. Robbins, charging that Gillespie is “very, very, very friendly” with the insurance industry, likened the delay to a homeowner calling the cops for a break-in and being told, “We’ll send someone next month.”

Gillespie showed some of her credentials as a consumer advocate, however, in revealing that last year she forced Fireman’s Fund Insurance Co. to repay $450,000 to customers who were charged excessive rates.

But by the end of her testimony, Gillespie reluctantly agreed to issue a cease-and-desist order against Travelers Insurance by the end of this month.

Travelers Vice President Russell Press told the hearing that the company disagrees with the commissioner’s finding of unlawful activity. He said the company has projected that it will lose money on auto insurance in California under the rules of Proposition 103 and wants to stop writing policies.

He said Travelers is prepared to argue that Proposition 103 cannot retroactively change the contract that exists between Travelers and its customers. That contract, he said, gives the company the right not to renew policies.

Robbins called the argument “something out of Alice in Wonderland. . . . It’s one of the most absurd legal positions I’ve ever heard.”

Press concluded, “Lawyers disagree all the time.”

Robbins, meanwhile, confirmed that he has given $20,000 of his campaign funds to the Voter Revolt organization to help in the legal defense of the ballot measure.

Robbins has taken more than $140,000 in campaign funds from insurance interests in the last several years but announced earlier this year that he had stopped accepting such funds. It was not until Proposition 103 passed in November, however, that he enthusiastically embraced the views of those who backed that initiative.