Hearings OKd on Insurance Rate Rollbacks : Litigation: Judge rules that challenges to a rebate order should only come after a company is told by the commissioner to grant the rebates.
A Los Angeles Superior Court judge ruled against the insurance industry Tuesday and gave Insurance Commissioner Roxani Gillespie the go-ahead for an immediate start of company rate rollback hearings under terms of Proposition 103.
Explaining that she had changed her mind after further study of the legal issues, Judge Dzintra Janavs said that the time for a legal challenge of Gillespie’s standard for judging whether a company will have to grant rebates of 1989 premiums is after a company receives a specific rollback order, not before.
Under Gillespie’s standard, any company found to have had profits exceeding 11.2% in 1989 in auto, homeowner, commercial and other lines combined will be ordered to rebate the difference to its customers up to a maximum of 20% of the total premium. The companies will also be required to pay 10% interest on the sums owed since 1989.
Five leading insurance companies--USAA, Progressive, Safeco, Allstate and the California State Auto Assn.--had contended that they should be permitted to challenge Gillespie’s 11.2% standard before any specific company hearings began, thus adding another lengthy round of litigation to what has already been a two-year industry fight against implementing Proposition 103 rollback provisions.
These insurers had been supported in court by scores of other insurers, and at first Janavs indicated she would go along. She delayed hearings that Gillespie had scheduled for the five companies on July 18.
But at a lengthy hearing Monday and in her ruling Tuesday, Janavs said she had concluded that Gillespie’s rollback rules were not final until she had directed companies to actually rebate some money. All such administrative proceedings must be complete before the companies can legally challenge them, she ruled.
Janavs’ decision, and two others she made Monday, indicated she might be more consumer-oriented and less industry-oriented than a prior judge assigned to hear Proposition 103 cases. That judge, Miriam Vogel, yielded the cases to Janavs when she was promoted by Gov. George Deukmejian from the Superior Court to the state Court of Appeal. On Monday, Janavs also dismissed company lawsuits aimed at overturning requirements that they sell assigned-risk auto policies at the current, relatively low rates.
Gillespie aides said that the commissioner will now go ahead with one or more company rollback hearings as soon as she can give proper legal notice.
The commissioner’s special counsel for Proposition 103 implementation, Karl Rubinstein, said he expects the companies that are first ordered to rebate money will challenge the order in court, and this will form a test case on Gillespie’s standards. Once the courts ruled on it, he said, all other companies would be forced to comply in quick order with any rollback standards that had been upheld.
Gillespie had originally vowed to complete all rollback-rebate decisions by last November, but lengthy hearings and court challenges by the industry have held her up.
