Garamendi Wins Round 2 in Insurance Rebate Fight : Prop. 103: A judge upholds commissioner’s bid to renew contract with two outside lawyers.

In his mounting attack on Republican Gov. Pete Wilson and Atty. Gen. Dan Lungren over Proposition 103 insurance rebates, Democratic Insurance Commissioner John Garamendi won a tentative round Wednesday: the right to choose his own lawyers.

The day after he lost one ruling to a Wilson appointee, Garamendi won one. San Francisco Superior Court Judge Lucy Kelly McCabe ordered Lungren to renew Garamendi’s contract with two outside attorneys. The two, Michael Jay Strumwasser and Fredric D. Woocher, have been leading his fight to force the insurance companies to pay a projected $2.5 billion in rebates of 1989 premiums. Their contract was scheduled to expire at the end of this month.

Lungren has insisted that Garamendi’s contract with the two, who had served as deputies to former Atty. Gen. John K. Van de Kamp, raised conflict-of-interest questions, and he had refused to approve its renewal.

Garamendi hailed the decision by McCabe, an appointee of former Democratic Gov. Edmund G. (Jerry) Brown Jr., saying it allows him to use “the finest attorneys in the entire country with expertise in the complicated field of insurance regulation who are independent of the insurance industry.”

Lungren said he will study whether to appeal, and he sought to downplay any political significance.

“Once again, I wish to emphasize that this is not a question of whether Proposition 103 will be vigorously defended or whether the insurance commissioner will be represented in the courts of this state,” the attorney general said.

“Rather, it is important to underscore the Department of Justice’s concern about protecting the interests of the people of this state against actual conflicts of interest, or the appearance of a conflict of interest, by the attorneys who are to represent them.”

Meanwhile, Garamendi, in a San Francisco news conference, again bitterly assailed Tuesday’s decision by a Wilson appointee indefinitely delaying his rebate orders. Office of Administrative Law director Marz Garcia, a former Republican state senator, ruled that the rebates do not constitute an emergency, and he refused to approve regulations allowing them.

The commissioner said his planned appeal to Wilson will put the governor on the spot.

“The central issue for the governor is, does he stand with the people or does he stand with the insurance industry?” Garamendi declared. “Two weeks ago, his own Office of Administrative Law decided an emergency format was proper. Now, they’re coming back and saying it’s not. That makes no sense.”

A spokesman for Wilson, Franz Wisner, said the governor had “nothing to do” with Garcia’s decision and will consider Garamendi’s appeal when he gets it.

Garamendi called the timing of the decision “especially propitious” for the insurance industry “in light of the barrage of industry lawsuits filed yesterday seeking once again to stop the implementation of Proposition 103 in its tracks.

“Like the plotters of the botched Kremlin coup, the industry and its lawyers can’t seem to understand and appreciate the power of democracy,” the commissioner added. “Their relentless and cynical attempt to thwart a legitimate vote of the people of California in favor of Proposition 103 will fail. They will be forced to pay up--with interest.”

But a lawyer for the industry, Kent Keller, said the lawsuits may not even be necessary for the moment.

“If what Garcia did stands, maybe we’re shooting at a dead horse,” he said.

Wayne Wilson, a vice president of the American Insurance Assn., said the decision to hold up the rebates shows that the industry is getting better at being able to block the rebate provisions of Proposition 103. He noted that industry lawyers had sent to Garcia the arguments that there was no emergency about paying the rebates.

“The industry may have become more sophisticated out of necessity,” Wilson said. “We’ve been groping along and we’re doing a little better. We know now how to deal with an emergency regulation when it’s filed, when before we didn’t.”