Garamendi Takes Appeal to Wilson : Insurance: He seeks to reverse ruling by state Office of Administrative Law holding up $2.5 billion in rebates to policyholders.


Contending that “endless delays are now the main strategy of the insurers,” Insurance Commissioner John Garamendi has appealed to Gov. Pete Wilson to reverse a ruling by the state Office of Administrative Law holding up $2.5 billion in rebates to California policyholders.

In 20 pages of legal arguments, Garamendi contended that “California’s consumers have waited long enough for rate relief they voted for in 1988" by passing Proposition 103. He urged the governor to reject the Sept. 3 decision by his appointee, Administrative Law Director Marz Garcia, that held Garamendi could not issue emergency regulations on the rebates and must hold more public hearings.

Wilson has until Oct. 7 to rule on the matter. There have already been months of public hearings under two insurance commissioners on the rebate question.

Garcia aroused even more concern in the Garamendi camp this week when, in the formal written version of his ruling, he pointedly questioned the insurance commissioner’s right to issue any regulations in rate-making matters.


This raised the possibility that the Office of Administrative Law, until now a rather obscure agency that performed mainly ministerial functions, might be set up as a major political stumbling block to the implementation of Proposition 103, the insurance initiative passed three years ago.

Garcia, however, cautioned in an interview not to read too much into his request to Garamendi. That request asked the commissioner to justify in legal arguments his right to issue regulations, not only for the rebates, but also for approval of future insurance rates.

Garcia said he had not made up his mind on whether Garamendi is entitled to issue regulations, and was merely passing along questions that had been raised by an insurance company lawyer. He said he was not sure of the lawyer’s name.

The lawyer, it was learned, is Gary Fontana, who represents the American Insurance Assn., 20th Century Insurance Co., and other insurers. Fontana said Friday he believes that Garamendi is legally obligated to make all rebate and rate making decisions in company by company quasi-judicial proceedings instead of through general regulations.


In appealing to Wilson, Garamendi cited the state Supreme Court’s 1989 decision upholding large parts of Proposition 103, as giving him the authority to issue regulations on the rebates and future rates.

“Much is necessarily left to the Insurance Commissioner, who has broad discretion to adopt rules and regulations as necessary to promote the public welfare,” the court said in its ruling.

Fontana said Friday he believes this passage was outside the central thrust of the high court’s ruling and that it should be asked to reconsider the question.

In a cover letter on his appeal to the governor, Garamendi observed: “We had planned to issue rollback (rebate) orders to companies this week. The Office of Administrative Law has now cast a cloud over those orders. Should we be forced to adopt the regulations on a non-emergency basis, as suggested by the OAL, we will lose at least four months.”

As for Garcia’s demand that he justify his authority to issue any regulations, the Garamendi appeal said that if he cannot issue broad regulations, he will “be faced with endlessly redetermining each of the factors in each of the hundreds of thousands of rate and rollback relief applications filed by insurers. . . .”

“The insurers would be happy to let the system become hopelessly and interminably bogged down,” Garamendi added. “The authority to adopt these regulations is beyond question.”

A spokesman for Wilson, Franz Wisner, said the governor will review Garamendi’s appeal and at present has no comment. Last week, Wisner said that Wilson had had nothing to do with Garcia’s decisions in the matter.