Gillespie Has Power to Freeze Insurance Rate Increases, Judge Rules : Prop. 103: Jurist rejects Aetna pleas to invalidate the commissioner’s action.

A Los Angeles judge Friday rejected pleas from the Aetna company that she invalidate Insurance Commissioner Roxani Gillespie’s Oct. 2 order freezing auto insurance rate increases, and instead strongly supported the freeze.

Declaring that “at some point the consumers in this state have to have some protection,” Superior Court Judge Miriam A. Vogel said she is satisfied that Gillespie “has the power” under what the judge termed “an emergency situation” to hold up all rate increases.

Unlike her ambiguous decision of Oct. 10, which appeared to some attorneys to have conceded to the Farmers group of companies the right to at least attempt to implement a 5.9% increase at the end of November, Vogel on Friday told Aetna’s attorneys that in her opinion, it would be “pointless” for Aetna to file for the 9.8% increase that it seeks.

Instead, Vogel tartly told the Aetna attorneys that their company ought to join 235 others that have entered into an agreement with Gillespie to respect the freeze, pending the outcome of hearings that the insurance commissioner has called on Proposition 103 implementation issues beginning Monday.

Vogel, a conservative appointee of Gov. George Deukmejian who in the past had expressed sympathy with insurance company positions, Friday said she sympathized with consumers who had voted for Proposition 103 last year, expecting to get relief from high insurance prices, only to find “a nightmare” of delays in its implementation.

A glum James R. Woods, the lead Aetna attorney, said outside the courtroom after the Vogel decision that he did not know whether Aetna would appeal. At the end of the proceeding in court, he and another Aetna attorney indicated that they would consider following Vogel’s suggestion about joining the agreement with Gillespie.

A jubilant Gillespie told news reporters outside the courtroom that “the consumers won” in Vogel’s decision and this time, unlike their position after the Farmers hearing, insurance company lawyers did not challenge Gillespie’s interpretation of the judge’s action.

“It is unequivocally clear the freeze is alive and well,” Gillespie said. “What the decision means is that the consumers of this state will not be seeing auto insurance rate increases in the near future.”

Gillespie said that as far as she is concerned, the freeze will last “a minimum of six months” from the date it was ordered “and it could be longer.”

The judge, in her comments, did not go so far. She said she could not rule at this point what would happen in a month or so after Gillespie’s hearings have gotten under way.

Vogel said she still intends to hold a status hearing on Farmers’ challenge to the rate freeze on Nov. 21 and might take action against any party--either the insurance commissioner or the insurance companies--that seems to be impeding the hearings on implementation of Proposition 103.

Meanwhile, representatives of three other companies--State Farm, Safeco and 20th Century--denied assertions by attorneys for Gillespie on Thursday that they were among 51 companies that had sought to take advantage of a perceived loophole caused by Vogel’s decision in the Farmers case by filing for rate increases.

All three said they had filed for various rate adjustments but not any general increases. A spokesman for 20th Century said its 21st Century subsidiary had actually filed for a rate reduction, and a spokeswoman for State Farm said that company had merely filed suggested price revisions--some up and some down--in an attempt to comply with new Proposition 103 pricing criteria.

Gillespie’s attorneys, Karl Rubinstein and Dana Brooks, did not contest the company denials.

During the three-hour court hearing, Vogel repeatedly expressed consternation that a large group of companies were apparently trying to use her earlier action in the Farmers case as an excuse for trying to circumvent the auto insurance rate freeze.

During the first hour of the hearings, the judge had indicated that she found Aetna’s arguments against the freeze on legal grounds to be convincing. She said that the Aetna attorneys relied on language in the state Supreme Court decision upholding Proposition 103, which seemingly allowed companies to raise their rates at will until Nov. 8.

But later, James Wheaton, an attorney for Proposition 103 author Harvey Rosenfield, convinced the judge that the Supreme Court decision could be read in such a manner as to give Gillespie authority to order a rate freeze at any time under emergency conditions.

When she ordered the freeze, the commissioner explained that the companies had caused an emergency by disclosing plans to implement major increases just in advance of the Nov. 8 date on which she gains the authority to approve or disapprove all future rate increases.