CALIFORNIA ELECTIONS INSURANCE COMMISSIONER : Garamendi Promises Fast Payment, Fraud Prosecution

Saying that realistically the Legislature will not adopt no-fault insurance, John Garamendi, Democratic candidate for insurance commissioner, vowed Monday that if elected he will pursue other reforms that he said would put a brake on auto insurance prices and stem costly litigation.

Garamendi, addressing the Town Hall speaking club in Los Angeles, pledged to put strict regulations in place for faster payment of claims by insurers, keep records of how quickly companies are paying the claims and make the results public “so everybody can see if they really are in the hands of the ‘good hands’ people.”

Faster payment of claims means that 60% of accident victims no longer will “require a lawyer to get a settlement,” Garamendi said.

He also promised to step up prosecution of auto insurance fraud by requiring that all autos be photographed at the time an owner purchases insurance and before and after repairs. He also said he would set up a centralized data bank to compare claims and thus identify those--including doctors and lawyers--who are filing or helping to file fraudulent claims.

“By the end of my four-year term, Los Angeles will no longer be called the fraud capital of this nation,” Garamendi said, predicting that prices would be favorably affected.

He added that companies seeking higher rates under California’s new “prior approval” system of regulation would, under his administration, have to provide audited financial information to justify the increases.

Some members of the audience, which included many from the insurance industry, said during a question-and-answer session that they sensed that, since the primary, Garamendi has moved away from industry positions and toward the stand on insurance issues taken by the state’s powerful trial lawyer lobby.

Garamendi denied that he has changed his position. He said he simply believes that the no-fault battle has gone on for 20 years in the Legislature without result and it is time to try other solutions. After his speech, he remarked that since Assembly Speaker Willie Brown (D-San Francisco) is against a no-fault system, its chances in the foreseeable future in California are nil.

No-fault insurance, under which accident victims collect for their damages from their own insurer rather than through the courts, has been heavily supported by insurers as the best way to cut insurance costs.

Garamendi a decade ago introduced a no-fault bill that was unsuccessful, but during the primary campaign he said he opposed no-fault.

Garamendi said in his talk that he has become convinced that without other reforms, no-fault will not control costs. “Yes, we do need to reduce the cost of litigation, but it does not by itself reduce significantly the cost of auto insurance,” he asserted.

In taking this position, the Democratic candidate placed himself at odds with his Republican opponent, Wes Bannister, and outgoing Insurance Commissioner Roxani Gillespie, who have backed no-fault.

Garamendi did not mention Bannister in his talk, but was critical of Gillespie for what he termed her failure to implement Proposition 103, the insurance initiative approved by California voters, and to protect and assist the state’s insurance consumers.

“The Department of Insurance is at the moment challenging a court order forcing it to process consumer complaints,” he noted. “Apparently, it still wants to continue its old practice of taking complaints once a month up to the trash bin.” The consumer hot line, he added, “is better known as the constantly busy line.”

Bannister is scheduled to address Town Hall Oct. 2.