Accelerated Ruling on Prop. 103 Rebates Urged : Insurance: Commissioner Garamendi's lawyers say the industry lobbying group's plan won't work.


The chief attorney for the state's largest insurance lobby suggested Friday that Insurance Commissioner John Garamendi should join the industry in asking for a quick state Supreme Court ruling on the validity of his order that more than $2.5 billion in rebates be sent to California policyholders.

But Garamendi's lawyers said the idea was unworkable, and even some insurance company lawyers said they doubted that the high court would agree to hear such a case before Garamendi has told each company how much it must pay under Proposition 103.

Thomas A. Aceituno, general counsel for the Assn. of California Insurance Companies, the lobbying group, said he felt that going to the Supreme Court now would shortcut the legal process and help speed up resolution of the rebate question.

One day after Garamendi announced his rebate formulas, Aceituno said he was confident that the court would throw out the calculations, along with Garamendi's ideas for setting rates. The court would agree, Aceituno said, that Garamendi has overstepped his authority in trying to set rates rather than just approving or disapproving rates submitted by the companies, as Proposition 103 provides.

Garamendi's attorneys, Fred Woocher and Michael Strumwasser, said a long line of cases shows that the Supreme Court would not find the rebate issue "ripe for adjudication" until a specific company is ordered to make rebates. No such orders are expected for about a month.

Besides, Strumwasser said, "I'd be astonished if Garamendi thought this (Proposition 103) needs another lawsuit at this point. We would not voluntarily join in taking this to court."

One attorney for a major insurer, who asked not to be identified, said of the suggestion that the Supreme Court make an early ruling: "Why in the hell would the Supreme Court want to do that?"

He and other insurance company attorneys noted that the Supreme Court had acted very quickly a few weeks ago, refusing to hear an insurer lawsuit to stop Garamendi's hearings on the rebate formulas.

Meanwhile, industry officials continued to express shock and opposition to Garamendi's rebate announcement.

"It is incomprehensible that a state regulator should seek to undermine an industry that is committed to protecting the public against the effects of disasters and tragedies," said Lowell Beck, president of the National Assn. of Independent Insurers.

"His timing is especially ill-chosen in these days, when the financial soundness of insurance companies is on everyone's mind," Beck said.

Garamendi has expressed confidence that property and casualty insurers, as distinguished from troubled life insurance companies, are in good financial condition.

In another development, talks were reported to be continuing between representatives of Atty. Gen. Dan Lungren and Garamendi over Garamendi's request for an authorization to keep Strumwasser and Woocher as special counsel, rather than use attorneys provided by Lungren.

Lungren has suggested that his office should represent Garamendi in litigation with the insurance companies, but aides to the Democratic commissioner have questioned whether the Republican attorney general is willing to take on the insurance companies.

Lungren spokesmen declined to comment Thursday on whether he supports Garamendi's $2.5-billion rebate order.

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