Van de Kamp Says Insurance Firms Engaged in Collusion

Outgoing state Atty. Gen. John K. Van de Kamp on Wednesday accused a number of insurance companies of collusion in suspending sales or threatening to withdraw from the state in the immediate aftermath of the passage of Proposition 103 in 1988.

But Van de Kamp, a longtime critic of the industry, said he had decided that the companies should not be prosecuted for the alleged violations.

The Democratic attorney general, who has only four days left in office, said it would be difficult to establish damages in a trial since the state Supreme Court stayed Proposition 103 within two days of its passage and decisions made by the insurers were soon rescinded.

Such a prosecution, he added, would have adverse free-speech implications, there might not be manpower in the attorney general’s office to pursue the case, and his successor, Republican Dan Lungren, might not be prone to prosecute in any event.

Nonetheless, Van de Kamp said evidence collected through testimony from 68 industry officials subpoenaed from 29 companies “revealed that by Election Day numerous detailed communications among the insurers had given the companies a clear understanding that many insurers were prepared to participate in what would amount to a mass withdrawal from California if the initiative passed.”

Immediately after its passage, the attorney general said, at least 67 companies, representing 75.6% of the pre-election private passenger auto liability insurance market in the state, took steps either to withdraw from the market or to suspend new sales or renewals.

But a week after the Supreme Court stay, he said, “over 90% of the . . . market was once again writing new business,” returning the sales situation to close to normal.

Van de Kamp said that he was sending a report of his investigation along with his conclusions to the governor and the outgoing and incoming state insurance commissioners.

This includes exhibits of testimony and intra-industry correspondence that indicates some companies, such as State Farm, were reluctant to engage in conduct that could be construed as collusive, while others, such as 20th Century, spearheaded efforts to get companies to join in such acts.

A spokesman for the industry, Thomas Conneely, president of the Assn. of California Insurance Companies, said he believes Van de Kamp could not have legally made public the subpoenaed testimony and correspondence had he not filed the report.

“Because we have not yet seen the attorney general’s complete report, it is impossible for us to respond to specific allegations in it,” Conneely said.

“However, we think it should be noted that . . . (Van de Kamp) has long been a critic of the insurance industry’s activities. Yet he and his staff, after more than two years of studies, have concluded that no case should be brought. That to us is the real news.”

Harvey Rosenfield, author of Proposition 103, said he feels the industry should be punished, and he said he would suggest that Lungren prosecute the insurers.

Van de Kamp noted in his report that “an agreement among competitors to withdraw from a market constitutes a group boycott in violation of both federal and state antitrust laws.

“The communications among insurance companies uncovered by this investigation, signaling to one another their willingness to participate in a simultaneous withdrawal from the market, suggest an unlawful group boycott had been agreed upon,” he said.