Wilson Tells Garamendi to Fight Insurance Rebate Battle in Court

SACRAMENTO — Gov. Pete Wilson on Monday denied a plea from state Insurance Commissioner John Garamendi to implement rules that Garamendi says he needs to deliver $2 billion in disputed car insurance rebates to consumers.

Twice during the last year, the Republican governor had reluctantly granted appeals sought by the Democratic commissioner. But this time, he refused.

“This third appeal by the commissioner is a transparent and cynical maneuver that does nothing to advance the resolution of the issues,” Wilson said in a statement.

Wilson noted that Garamendi’s disputed legal authority to impose the rebates promised by voter-approved Proposition 103 is scheduled for a major court test in November. The insurance industry has fought the rebates since passage of the ballot initiative.

“My intervention is no longer necessary or useful,” the governor said in a four-page decision. “Commissioner Garamendi must fight this out in court with the insurers he is responsible for regulating.”

Garamendi, a potential contender for governor who has made delivery of the long-promised Proposition 103 rebates the cornerstone of his tenure, denounced Wilson’s action and said it will further delay refunds.

He said Wilson had “derailed and tossed into the deep freeze” rebate hearings of major car and homeowner insurers such as Geico, State Farm and Aetna. “They are on permanent freeze now.”

The exchange between the two officials marked another round in the long-running legal and political fight over implementing the rebate provisions of the 1988 insurance reform initiative. No one has forecast when rebate checks will finally arrive for millions of Californians.

Although several carriers, including the Automobile Club of Southern California, Mercury and Progressive, have refunded about $300 million to their customers, other major insurers refuse to do so. Among other things, they charge that Garamendi’s rules are confiscatory and prohibit them from fully presenting their cases.

Twice previously, when Marz Garcia, then the director of the Office of Administrative Law, rejected Garamendi’s emergency regulations, he was overturned by Wilson, who said he was anxious to move the rebate issue forward.

In February, Wilson said the bureaucratic dispute over Garamendi’s authority properly belonged in the courts and he warned that he no longer would intervene.

The test case cited both by Wilson and Garamendi involves the commissioner’s order for 20th Century Insurance Co. to refund $101 million to customers. Most of the insurance industry challenges are expected to be consolidated with this case in order to obtain a definitive ruling.

Marjorie M. Berte, insurance adviser to Wilson, said Monday that Garamendi is “very fond of accusing Marz Garcia and the governor of holding up the people’s rollback checks. Well, that’s a lie. As long as the issues are in court, we don’t have a role.”

Wilson’s action came two weeks after the Democratic-dominated Senate Rules Committee rejected Wilson’s appointment of Garcia as permanent director of the Office of Administrative Law. Committee Chairman David A. Roberti (D-Van Nuys) made clear that the rejection was based on Garcia’s blocking of the rebate regulations.