Gillespie Charges Firms Conspire to Thwart Prop. 103 : Insurance: The commissioner files suit in her strongest legal attack yet on the industry. She seeks an injunction to halt the alleged practices.

Insurance Commissioner Roxani Gillespie has filed a lawsuit accusing California’s insurance industry of “engaging in a conspiracy . . . seeking to block, hinder or delay the implementation of Proposition 103” and asking a Los Angeles judge to issue an injunction halting such tactics.

The suit--a cross-complaint in a case where the Farmers group of companies is trying to raise its auto insurance rates despite Gillespie’s six-month freeze on increases--also accuses Farmers and 2,000 unnamed insurance companies, industry trade associations and various company officers and employees of antitrust and other violations of the insurance initiative.

“The commissioner believes there is a concerted effort on the part of insurers to delay and hinder the administrative process in the hope that the entire process will collapse and that the insurers can obtain benefits from the resulting chaos,” Gillespie’s attorney, Karl Rubinstein, asserts in the complaint released Thursday.

“In particular, insurers have been and are still making rate increase filings with the intent to finesse these increases into place by overwhelming the Insurance Department’s ability to administer the process and to drown the Insurance Department in paper and administrative procedures,” the complaint adds.

It further asserts that “insurance carriers, insurance trade associations and individuals acting in concert with them (are seeking) to utilize Proposition 103 as yet another springboard for rate hikes and increased consumer cost.”

Gillespie also asked the court to issue a broad order upholding the emergency pricing regulations and rate increase ceiling she announced in San Francisco on Tuesday.

An initial hearing on Gillespie’s suit, her sharpest legal attack yet on the industry, is slated this afternoon before Superior Court Judge Miriam A. Vogel, but Vogel is expected to only call for briefs and make no immediate decision.

In connection with the same hearing, Gillespie has filed legal motions asking that Vogel issue an injunction today specifically blocking Farmers from implementing a 5.9% rate increase the company has been seeking, but which Vogel has delayed.

Gillespie’s sweeping assertions in the new lawsuit, and particularly her characterization of so many insurers as engaged in a conspiracy, were brusquely rejected Thursday by Leonard Venger, attorney for Farmers.

“I couldn’t disagree more,” Venger said. “Any allegation of a conspiracy is nonsense.”

Venger said that throughout the long series of implementation hearings and other deliberations on Proposition 103, lawyers representing the various insurers have followed different strategies and often even pursued different goals.

“The lawyers have taken great pains never to discuss their individual clients’ operations among themselves,” he said. “There is no grand insurer strategy. There is no such thing,”

Meanwhile, in Sacramento, a spokesman for the industry’s largest state lobby, the Assn. of California Insurance Companies, declared, “It seems apparent that the commissioner is asking the courts to sanction insurers for participating in the process which she herself created.”

“Insurance companies have worked for the fair implementation of Proposition 103, because they want a system that works both for them and consumers,” spokesman George Tye said.

“Commissioner Gillespie’s job is to listen to all sides in this important debate and to deal with the many issues that are presented to her,” he went on. “It’s a tough, frustrating job, but it must be done. It’s not proper for her to ask a court to wave a magic wand and to make her problems go away.”

Gillespie’s complaint expressed frustration not only with the insurers but also with consumer groups.

“The process of (Proposition 103) implementation has been hindered by the activities of various groups which seek to dictate various interpretations of the statute which are diametrically opposed to one another,” the complaint said. It accused “various consumer groups” of advocating “rate reductions and rate plans in disregard of (the state Supreme Court decision on Proposition 103) and the real limitations it places upon rate reductions.”

But the consumers were not named as defendants in the suit, and it seeks no action against them.

In other insurance developments:

- A Northern California state senator, Republican James W. Nielsen of Rohnert Park, said he will introduce a constitutional amendment in the Legislature to restore the right of auto insurers to base their rates on where customers live. This would undo some of the effects of Gillespie’s regulations issued this week, but it would require a popular vote for it to go into effect.

- California’s leading auto insurance seller, State Farm, criticized the commissioner for ruling out the use of age, gender, academic achievement and marital status in the pricing of auto insurance, calling them “proven and well recognized indicators of driving habits which fairly and accurately determine appropriate prices.”

- Allstate, another major seller, said, “We find the commissioner’s newly introduced guidelines extremely complex, and they will require a significant amount of additional study to understand and implement. . . . Until this evaluation has been completed, we cannot reach any specific conclusion (about them).”

- Harvey Rosenfield, author of Proposition 103, and Walter Zelman, the former Common Cause director who is a Democratic candidate for insurance commissioner, criticized Gillespie’s regulations. Rosenfield said he felt that “regulations don’t have to be so impossible to decipher. In other states, insurance regulations are straightforward.” Zelman said he thinks Gillespie’s regulatory interpretation of Proposition 103’s pricing stipulations are “a fraud” and is asking the state Office of Administrative Law to refuse to make them permanent.