Suit Contends Robbins’ ‘78 Insurance Bill Cost Millions : Courts: The class action contends that the legislation was the result of bribes and illegal political influence. It seeks unspecified damages and a cut in rates.

Legislation by former Sen. Alan Robbins (D-Van Nuys) intended to deregulate a specialized segment of the insurance industry has cost Californians millions of dollars, according to a class-action suit filed this week.

The civil action filed Thursday contends that Robbins and Ron Gordon, president of now-bankrupt Sentinel Insurance Co., initiated a scheme in 1978 to lift caps on credit insurance rates.

As part of a plea bargain with federal prosecutors, Robbins last year admitted to five acts of racketeering, including accepting $12,000 in 1985 from Sentinel in exchange for helping with a bill designed to eliminate regulation of the credit life insurance industry--policies that pay off credit card bills or other charges in the event of death or disability. The bill, written by Robbins, passed and was signed into law.

Robbins, formerly chairman of the Senate Insurance, Claims and Corporations Committee, resigned his seat and is serving a five-year sentence at the federal correctional institution at Lompoc.

Also named as defendants in the action filed in U.S. District Court here are Sentinel, which was based in Century City, Gordon and a Malibu public relations firm and its president, Jennifer Goddard.

The suit also implicates other insurance companies but does not single them out by name.

Pat Coughlin, a San Diego lawyer whose firm brought the case, said he believes that these other insurance companies provided Sentinel with funds to win passage of the legislation.

“The people who profited by the legislation and paid the bribe should have to return the money” earned as a result of the change in the law, Coughlin said.

The suit seeks unspecified damages and a cut in credit insurance rates.

The suit contends that a 1978 credit insurance bill sponsored by Robbins was “a result of bribes and improper and illegal political influence exerted” by Gordon and his company.

As a consequence of bribes and other illegal influence, Robbins in 1979 won passage of another bill “to eliminate competition and to charge and collect excessive prices in the credit life and credit disability insurance market,” according to the suit.

Both measures were vetoed by former Gov. Edmund G. (Jerry) Brown Jr. But a third measure, which in 1985 blocked credit life regulations from taking effect, was signed into law.

“As a direct result of these illegal activities, defendants obtained millions of dollars of additional and excessive premium rates, commissions, compensation and profits from the sale of credit life and credit disability insurance in this state,” according to the suit.

The suit was filed by a San Diego law firm and parallels an action brought by the same firm earlier this year in San Diego Superior Court. That matter was dropped.

Coughlin said the San Diego case was dropped because lawyers decided to include civil racketeering charges--which cannot be filed in Superior Court--against Robbins and the others. Both cases were filed on behalf of Edward A. Chappell, identified only as a California resident who purchased credit insurance.

Mark Rademacher, Goddard’s lawyer, said he could not determine why his client is targeted in the suit because she is merely “a small-business owner trying to make a living.” He said Goddard “basically knows nothing about it.”

As part of his plea bargain, Robbins said the $12,000 was not paid directly to him in 1985 but was funneled through Goddard’s public relations firm, the Goddard Co., which made payments at his direction.

Michael L. Lippman, Robbins’ San Diego-based lawyer, said he could not comment until he sees the suit. But he said the action sounds similar to the Superior Court case that was “voluntarily dismissed down here.”

Gordon, who now lives at Lake Tahoe, said he has not seen the suit. But after being told about the action, he said the charges are “totally untrue” and declined further comment.

He has previously acknowledged paying the money to Goddard but denied that the payment was meant as a bribe for Robbins. “I’m shocked,” Gordon said. “I went to Alan in good faith. I acted in good faith as a citizen who deals with a senator.”

Gordon said he believed the money was to be used for research and for entertainment in connection with passage of the bill, but that he never saw the work Goddard supposedly prepared.

Times staff writer Paul Jacobs contributed to this story.