Judge Calls for Halt on Prop. 103 Settlements

A Superior Court judge Monday ordered a halt to any new Proposition 103 insurance rollback settlements, ruling that the Legislature probably exceeded its authority when it passed a law saying insurance agents’ commissions were not subject to the 1988 rate-cutting initiative.

The preliminary ruling, if confirmed, may increase the total rebates to policyholders by as much as $100 million, according to the Proposition 103 Enforcement Project, a West Los Angeles group headed by the initiative’s author, Harvey Rosenfield.

In her order Monday, Los Angeles County Superior Court Judge Diane Wayne cited a ruling in December in which the California Supreme Court said lawmakers could only amend Proposition 103 in ways that “further the purposes” of the initiative. The high court, in a case involving Amwest Surety Insurance Co., struck down a law it said weakened the initiative by exempting the surety industry.

Wayne said the Legislature may have made the same mistake in the law regarding agents’ commissions.

Insurers and agents pushed for the 1993 law, which requires the insurance commissioner to ignore the commissions when applying the 20% premium rollback called for in the initiative.

If the preliminary ruling is confirmed, it could cost taxpayers money, said Richard Wiebe, spokesman for Insurance Commissioner Chuck Quackenbush. The law exempted not only commissions but also the 2.35% premium tax that the state collects on each policy. Insurers, if forced to rebate 20% of their agents’ commissions, might also demand that the state return the “excess” premium tax, which could total as much as $47 million, Wiebe said.

Quackenbush has settled all but 24 of the 161 Proposition 103 rebate cases that he faced when he took office a year ago. Wiebe said the remaining cases, including State Farm and Fireman’s Fund, are already scheduled for hearings. The judge’s order could delay the process for months, he said.