Prop. 103 Rate Rollback Hearings Begin

More than 22 months after voters called for insurance rate rollbacks by passing Proposition 103, and 10 months after the date by which Insurance Commissioner Roxani Gillespie had vowed to finish all such decisions, the first round of rollback hearings began here Monday.

But the long-delayed hearings, which could set the pattern for hundreds of insurers to rebate part of the 1989 premiums, are focusing on only two companies--Safeco and the California State Automobile Assn. Lawyers for both companies made it clear that whatever decisions result are likely to be appealed to the courts.

In short, the conclusions reached here are expected to form the basis for a test case on Gillespie’s rebate standards that could take months or years to wend its way through the courts before rate-payers would get any money back.

Less than five minutes into Monday’s hearings, lawyers for Safeco were pressing claims to have the administrative hearing judge removed, seeking an indefinite delay in their portion of the hearing and asking for variances from the rollback standards announced by Gillespie.

The commissioner had notified Safeco Aug. 8 that it would be asked to rebate to its customers $41 million, or about 11% of its 1989 premiums. Gillespie said the California State Automobile Assn. was being asked to rebate $92 million, or about 7% of its 1989 premiums. Those figure do not include the 10% interest since 1989 that would have to be added to all rebates.

These tentative rulings, which are to be examined at the hearings that started Monday, were in accord with Gillespie’s standard that allows a 11.2% annual rate of return for companies on their combined lines of insurance covered by Proposition 103. These include automobile, homeowners and commercial policies.

Under the voter-approved insurance initiative, any company earning more than the accepted rate of return would be required to return the difference to customers, up to 20% of the total 1989 premium. Only premiums paid in 1989 are eligible for rebates under Proposition 103.

The hearings were expected to take only a few days at the most, with the hearing judge taking testimony on the companies’ profit margins and comparing them to Gillespie’s standard.

But Monday, lawyers on all sides said the initial hearings could last weeks. In petitioning for variances from Gillespie’s standards, lawyers for both companies indicated that they are inclined to rehash many of the arguments aired in four months of testimony earlier this year that led to adoption of the standards.

Monday’s hearing had some heated moments, such as when Gillespie’s lawyer, Karl Rubinstein, sparred with Safeco’s lead attorney over the firm’s attempts to remove the hearing officer.

Rubinstein called Kent Keller, Safeco’s attorney, a “Philadelphia lawyer” and at one point described Safeco as “the biggest hog at the trough” in the rollback hearings.

Keller objected to the characterization and defended Safeco as having the fourth-lowest homeowners premiums in a state survey of 28 companies.

Gillespie said nothing during the first session, but both she and Rubinstein frequently have charged that the insurance industry is engaged in an attempt to kill off implementation of Proposition 103 by endless litigation.

The administrative hearing judge, Frank Britt, also seemed skeptical of the company’s contentions. He refused to disqualify himself.

Later, after hours of behind-the-scenes negotiations, Safeco’s attorneys agreed to answer some of the 21 financial questions and California State agreed to answer all the questions submitted to it.