Next Insurance Chief Will Face Politician’s Nightmare : Elections: Winner of race to replace Garamendi will inherit 20 major suits and 600 fraud investigations.

The candidates for California insurance commissioner in the June 7 primary call the job a challenge.

It’s more like a politician’s nightmare.

Outgoing Commissioner John Garamendi is bequeathing his replacement 20 major lawsuits, 600 open fraud investigations and 70 requests by insurance companies for rate increases.

Even as Garamendi runs for the Democratic nomination for governor, the Insurance Department is defending itself in the state Supreme Court, where the industry has mounted a major challenge to the commissioner’s basic authority to limit its profits.

In another case, the California Supreme Court will decide whether the Legislature can weaken Proposition 103, the 1988 initiative that made insurance commissioner an elective office and created the current regulatory system.

Then there are the policy issues awaiting the next commissioner: How to overhaul the health insurance system, limit auto insurance costs, provide coverage for the millions of Californians who have no insurance, and see to it that insurance companies offer coverage against the disasters that routinely strike California.

All the while, the commissioner is responsible for analyzing the financial health of insurers, and must seize them if they become insolvent. Garamendi, the state’s first elected commissioner, took over several companies, including the massive Executive Life, and litigation over them continues.

Other than the governor, the insurance commissioner is the one statewide officeholder who most directly affects the wallet of every consumer in the state.

Californians spend $60 billion a year to insure their cars, homes, health, life and businesses. It is the insurance commissioner who decides whether rates will rise and whether consumer complaints are heard.

Despite the headaches that await the next commissioner, an intense fight is under way in both major parties for the right to take on the $95,052-a-year job.

The three main Republican candidates in the primary are Jim Conran, Gov. Pete Wilson’s former Department of Consumer Affairs director; Assemblyman Chuck Quackenbush of Cupertino, and Wes Bannister, an Orange County insurance broker who was the party’s nominee in 1990 against Garamendi.

The two main Democrats are state Sen. Art Torres, who has represented the Eastside of Los Angeles in the Legislature for 20 years, and Assemblyman Burt Margolin, who has represented the Westside for 10 years.

Both Democrats vow to pressure companies into granting rebates ordered by Proposition 103, and say they will consider withholding decisions on rate increases for companies that have refused to issue rebates. Garamendi used that tactic, but it has been challenged in court by insurance companies.

The Republican candidates acknowledge that they opposed the initiative, but pledge to enforce its provisions. They say they intend to hold down rates by being tough on insurance fraud, a point Torres also makes.

The insurance industry is vitally interested in the outcome of this campaign. But so far, its public involvement is limited to convening candidate forums and reporting on the race in trade journals.

Insurance executives have shied away from contributing the tens of millions they spent trying to defeat Proposition 103 and promote competing alternatives six years ago. They contribute little now, believing voters would reject any candidate who is perceived as being close to the industry--a view supported by the Democratic candidates and Republican Quackenbush, all of whom pledge to take no money from insurance companies.

Conran and Bannister accept money from the industry in their low-budget campaigns. The Assn. of California Insurance Companies has donated $10,000 to Conran, and a few insurers have donated up to $2,500 to Conran and Bannister.

Given the office’s consumer bent, Democratic Party leaders believe their candidate has a natural advantage over the Republican nominee in the November general election.

Margolin, 43, and Torres, 47, are liberal on social and consumer issues but differ markedly in their styles. Torres is a part of the Senate power structure, and chairman of the Insurance Committee.

He is among the Capitol’s best orators, and often takes his committees on the road for headline-attracting hearings. This year, he drew attention by traveling to the site of the 1991 Oakland fire, where he announced that he was introducing “the homeowners bill of rights.” The bill would streamline homeowner insurance claims.

Last year, he held widely publicized hearings on a pay-at-the-pump proposal in which motorists would pay more for gasoline in exchange for lower-cost auto insurance. He concluded that the idea lacked support and quickly dropped it.

Margolin, by contrast, is a loner who is not known for sharp-tongued sound bites. The Assembly Health Committee chairman, he has spent years toiling on the intricacies of workers’ compensation and health insurance--issues that do not lend themselves to brevity.

One of Margolin’s legislative victories came in 1992, when he won passage of a law that helps small businesses provide health insurance to workers. Other legislators might have trumpeted its passage to the news media as a major event. Margolin called the bill modest, and it garnered virtually no publicity until Wilson signed it into law and took credit for it.

Within the Capitol, Torres is viewed as being willing to negotiate and strike compromises. Margolin is less ready to compromise, and is campaigning as an unreconstructed consumer advocate.

“The industry has too much power,” Margolin said. “The average consumer gets crushed when an insurance carrier says, ‘We’re going to object to your claim.’ The leveler, the one person who can equalize the odds for the consumer, is the insurance commissioner.”

Torres also says he would bring a strong consumer orientation to the office, but criticizes Garamendi for his rhetorical attacks on the industry.

“My first duty is to the consumer,” Torres said, pledging to be tough on “bad actors” in the industry. But he added, “In most areas, if there is a way to strike a balance, and still maintain a priority to consumers, then I’m going to do that.”

Torres has won several endorsements, including one from the Democratic Party. But in the most recent campaign statements, Margolin had $454,000, compared to Torres’ $115,000. Margolin began his career as an aide to Los Angeles Reps. Henry Waxman and Howard Berman, when Berman was in the Assembly. Berman, Waxman and their allies have given Margolin’s campaign $100,000.

Torres is likely to close the money gap. He is a proven fund-raiser who spent more than $1 million in his unsuccessful race against Gloria Molina to become Los Angeles County supervisor in 1991.

Torres began his life in politics by working for Cesar Chavez, founder of the United Farm Workers. He and Chavez had a falling out in the 1980 fight for the Assembly speakership, when Torres, then an assemblyman, sided against Berman, Chavez’s choice to become Speaker.

In the past, Torres has been mentioned as one who could win statewide office. But he slipped up in his personal life and was convicted twice of drunk driving. After the second conviction, in 1990, his driver’s license was revoked. His license has since been returned, but he says he continues to pay high auto insurance rates.

“I’m not going to hide from the truth. I’ve made some mistakes. I’ve overcome them,” said Torres, who has quit drinking.

Quackenbush, 40, probably the wealthiest of the five major candidates, has loaned his campaign $350,000. A telegenic moderate, he is close to Wilson. Quackenbush is critical of Garamendi, charging that he created a very hostile environment for the industry that drove some insurance companies out of the state.

Quackenbush views himself as a free-market advocate who argues that insurance companies that have left the state can be lured back. Once they return, he said, “there will be an insurance price war,” resulting in lower prices.

Unlike Conran and Bannister, who will not have money to spend on television commercials, Quackenbush intends to run a series of 30-second spots in some of California’s 11 media markets. Although he is taking no money from insurance companies, he is accepting it from independent agents and brokers.

Quackenbush made his money when he and his wife founded a company called Q-Tech, which supplied temporary workers to Silicon Valley firms. The couple are now venture capitalists.

Conran, 42, went to work for Wilson as director of the Department of Consumer Affairs in 1991 after working as a Pacific Bell executive for 13 years. As director, he oversaw boards and commissions that regulate businesses and professions. He quit the agency to run for office.

As director of the agency, Conran quickly gained a reputation as a tough, effective administrator. He ordered an investigation of the state Medical Board’s handling of patients’ complaints, finding that the board dismissed or destroyed hundreds of complaints against doctors in 1990 in an attempt to erase a backlog.

He also investigated Sears auto repair shops, finding fraud in the operation and reaching an $8-million settlement with the giant retailer.

“I understand how the regulatory process should work, and how to make it better, and I don’t know that other candidates know that,” Conran said.

Bannister, 57, owns an independent insurance agency in Huntington Beach, where he served on the City Council for four years. He was the GOP nominee in 1990, and received 37% of the vote against Garamendi.

He said he decided to run again because no other candidate stepped forward who understands how insurance works. The June 7 primary will mark the third time he has been on a statewide ballot, which suggests that more voters will recognize his name. But he is running a low-cost campaign and expects to raise about $100,000.

“What I do is solve the problems of consumers,” Bannister said. “The consumers are my clients. I’m not a fan of the industry.”