Garamendi Challenged Over Settlement

In a rare split with Insurance Commissioner John Garamendi, Proposition 103 champion Harvey Rosenfield on Wednesday challenged Garamendi’s handling of a recent settlement under the insurance rate rollback initiative, calling the deal too generous to the insurance company involved.

Rosenfield’s Voter Revolt organization asked for a hearing before an administrative law judge to review last month’s agreement between the Insurance Department and San Mateo-based California Casualty Group.

It was the first formal objection to any of the 12 voluntary settlements that the Insurance Department has negotiated with carriers while the broader workings of Prop. 103 have been tangled in industry-sponsored lawsuits. If Voter Revolt decides to contest all future settlements, it will further delay a process that has dragged on since the initiative passed in 1988.

The settlement calls for California Casualty to rebate $5 million to those who held its policies in 1989, the year affected by the rollback provisions. The insurer also agreed to cut its auto rates by 7% for the coming year, for added savings of $11.2 million, Garamendi said.

But Rosenfield said the rate cut is inadequate compensation for a rebate that is much too small. Under Garamendi’s original formula for implementing Prop. 103--rejected last February by a Superior Court judge--California Casualty’s rebate liability would have been $24 million.

Garamendi’s staff argues that the settlement is a pragmatic compromise.

“Should we wait another one, two, three years to get something through litigation--and maybe end up with nothing--or should we try to get something now?” asked Bill Ahern, deputy commissioner.