Wilson’s Appointee Rejected : Government: Democrats on the Senate panel refuse to confirm the official who blocked $1.5 billion in insurance rebates to consumers.

Democratic members of the Senate Rules Committee on Tuesday refused to confirm Gov. Pete Wilson’s appointment of the state official accused of thwarting the delivery of $1.5 billion in Proposition 103 insurance rebates.

Both Democrats and Republicans agreed that Marz Garcia is qualified to continue as director of the obscure Office of Administrative Law, but Democrats insisted that Garcia’s professional credentials were outweighed by his actions over the last year to block the long-promised rebates.

The rejection of Garcia, a former GOP state senator and bank executive, handed Republican Wilson a substantial political setback at a time when he is struggling to establish his leadership in state budget issues.

It represented a political victory for Insurance Commissioner John Garamendi, a potential Democratic gubernatorial contender who had accused Wilson and Garcia of fronting for insurance industry opponents of Proposition 103.

Likewise, it constituted a victory for Voter Revolt--the organization that sponsored Proposition 103 on the 1988 ballot--which had demanded Garcia’s rejection. A key provision of the measure called for a 20% rollback in insurance premium rates of drivers and homeowners and a refund to policyholders.

Wilson issued a statement denouncing the rejection of Garcia as an “act of naked partisanship” aimed at serving the “policy and political agenda of the insurance commissioner.”

He did not announce a new director for the $95,000-a-year post.

After the defeat of Garcia, Garamendi told reporters that “now the fate of the rebaters is in the governor’s hands.”

The insurance industry opposed Proposition 103 on the ballot and has fought implementation of the $1.4 billion in rebates in the courts ever since. Six insurance carriers, however, have agreed to provide $300 million in refunds to about 1 million policyholders.

Senate leader David A. Roberti (D-Van Nuys), chairman of the committee, told Garcia that it was “enormously important” to Californians that they get the refunds that were promised when voters approved Proposition 103.

Roberti said that while there may be legal differences over bureaucratic procedures for delivering the rebates, Garcia as a state officer should “err on the side of the public” and remove obstacles blocking their implementation.

In a low-key presentation, Garcia, who will leave his job today, said he acted properly in three times rejecting rebate and rate-setting regulations proposed by Garamendi. He said the rules were legally defective.

“They can have the regulations if they just clear the defects up,” said Garcia, a former Republican legislator from Menlo Park.

But Roberti told him he believed Californians are looking to the Senate to take action to hasten the mailing of rebate checks.

Democrats Nicholas Petris of Oakland and Henry Mello of Watsonville joined Roberti in voting against Garcia. Republicans Robert G. Beverly of Manhattan Beach and William A. Craven of Oceanside voted for him.

As director of the Office of Administrative Law, Garcia was charged with screening thousands of regulations adopted by the vast state government bureaucracy, including those of the Department of Insurance, which is headed by the independently elected commissioner.

At times, Wilson has seemingly moved in contradictory fashion in trying to deal with Proposition 103. The first two times Garcia rejected Garamendi’s temporary rebate regulations, Wilson reversed his appointee and ordered that the rules be implemented.

But earlier this year, Wilson upheld Garcia’s third disapproval of regulations, saying that the dispute between his appointee and Garamendi properly belonged in the courts.

Garamendi recently sued Garcia but abruptly dropped the action last month. He told the Rules Committee on Tuesday that he did not believe it served the public interest for one state government agency to sue another.

Wilson asserted that by abandoning the suit Garamendi demonstrated he is “not genuine in his efforts to prove that the Office of Administrative Law is wrong in its evaluation of his regulations.”