Insurer Agrees to Prop. 103 Rebate Policy

A Northern California medical malpractice insurer Wednesday became the first company to reach a deal with Insurance Commissioner John Garamendi to voluntarily return money to customers in compliance with the rollback provisions of Proposition 103.

NORCAL Mutual, which insures about 9,000 doctors, entered into a formal agreement to return $19.9 million to California customers who held policies in 1989. The rebates will include about $4.5 million in accrued interest.

Policyholders who still are insured with the company will get their money back in four quarterly credits against their 1992 bills, under the agreement. Those no longer insured by the company will get a refund check by March 31, 1992.

Garamendi has said total rebates to California consumers under Proposition 103 will exceed $2.5 billion, based on 1989 premiums and accrued interest. Bill Schulz, a spokesman for Garamendi, declined to say whether other insurance companies will be allowed to make rebates in the form of credits on future bills.

According to the terms of the agreement announced Wednesday, NORCAL Mutual would still have to make the rebates even if a court decision later invalidates the rollback provisions of Proposition 103. The initiative passed by voters ordered a rollback in 1989 premiums, but the lower rates have never been implemented while the measure is fought over in court.

Garamendi hailed the agreement, saying the company “has wisely decided to fulfill the letter and spirit of Proposition 103, place the interests of its policyholders first and put their rollback liability behind them.

“While NORCAL Mutual is a unique company with a specialized niche market, I hope their decision will serve as an example to other insurers that Proposition 103 can be fully, fairly and quickly implemented.”

P.J. Livingston, vice president for sales for the company, said negotiations between NORCAL and Garamendi began months ago. The agreement was reached before Gov. Pete Wilson this week told Garamendi he could proceed with specific rebate orders to hundreds of insurance companies, Livingston said.

Noting that the company is a mutual one, owned by its own policyholders, Livingston said, “We felt that it would be in our policyholders’ best interest not to expend any money on litigation and management time fighting this.”

Other mutual companies, such as State Farm, the state’s largest seller of auto insurance, continue to resist the rollbacks.