Assembly Report Takes Quackenbush to Task

A legislative report on the investigation of former California Insurance Commissioner Chuck Quackenbush condemned him Monday for misusing his office for personal political goals and the enrichment of “his political associates and friends.”

But the long-awaited conclusions of the state Assembly Insurance Committee stopped short of advocating changes in state law, such as a ban on insurance company contributions to candidates for the regulatory post, that are under consideration by the Legislature.

Also absent was any direct criticism of the insurance industry for its handling of claims after the 1994 Northridge earthquake.

“The committee focused all of its fire on Quackenbush,” said Jamie Court, a Santa Monica consumer advocate. “The report’s recommendations were watered down and offered too many equivocations to the insurance industry.”

The 98-page report contained a set of general recommendations, calling for restrictions on how elected regulators can use money they obtain in settlements; for more public disclosure on settlements such as those Quackenbush struck with insurers found to have mishandled Northridge claims; and more legislative oversight power to review settlements.

Other recommendations included review of the Legislature’s power to subpoena Department of Insurance documents and compel witnesses to testify.

“This report wraps up the Assembly’s investigation into former Commissioner Quackenbush,” said Insurance Committee Chairman Jack Scott (D-Altadena). “But it does not end either our work or the investigations going on elsewhere.”

Quackenbush’s actions in office are still being probed by state Atty. Gen. Bill Lockyer, the U.S. district attorney and the Fair Political Practices Committee.

Scott chaired a series of five hearings in the Assembly beginning in April that focused on how Quackenbush, who left office July 10, spent more than $14 million in insurance company settlements.

Testimony from 42 witnesses, including senior Department of Insurance staff, detailed how the ambitious politician, one of only two Republicans in statewide elective office, used the money to buy self-promoting political ads, conduct political polling and pay millions to longtime political advisors.

At a news conference Monday, committee members defended the report as a bipartisan effort that was careful to stick to the facts as they emerged from several months of hearings.

“There comes a time when facts need to speak for themselves,” said Assemblyman Tom McClintock (R-Northridge), normally one of the Legislature’s most loquacious members. “The facts included in this report speak loudly and clearly.”

Not much later, McClintock was on the floor of the Assembly arguing stridently for a bill that would extend the statute of limitations in Northridge earthquake claims by a year.

The measure, by Senate President Pro Tem John Burton (D-San Francisco), passed the Assembly on Monday by a vote of 49 to 22 after earlier clearing the Senate. It would allow policyholders who contacted their insurers, only to learn the deadline for claims had expired, to make their cases in court. It would apply only to those who had attempted to make claims before the start of this year.

“All this measure does is allow people their day in court if the only thing preventing them from their day in court is the statute of limitations,” said McClintock.

It is unclear which reforms, if any, of the Department of Insurance will come out of the Legislature before it adjourns its two-year session at the end of this month.

In addition to a bill by state Sen. Jackie Speier (D-Hillsborough) that would restrict insurance company contributions to candidates for commissioner, other proposed legislation includes bills to change the post back to an appointed position, which it was before 1990, and make public the department’s confidential reviews of insurance companies.

None of these legislative efforts will get much of a boost from the Insurance Committee report released Monday. Committee members said debate over the wording of the report continued until 11 p.m. Sunday. Changes demanded by Republican members of the committee included deleting a proposed subtitle--”Political Opportunism and Broken Faith”--and excising all uses of the word “kickback.”

Rather than urging specific action, the report offers suggestions for “review.”

The section dealing with the Legislature’s powers to demand documents and compel testimony from state witnesses contains the following wording: “The Legislature’s access to documents and other information held by state agencies should be reviewed.” Similarly: “The Legislature’s ability to compel testimony from state employees should be strengthened.”

Even as the committee gathered for the Monday news conference, the language of the report was being hedged. Thus, instead of a recommendation that “the Legislature should enact a law to ensure relief for Northridge earthquake policyholders,” the committee at the last minute changed the recommendation to “The Legislature should consider enacting a law in consultation with the Insurance Commissioner to ensure relief. . . . “

But while the report softened its language about what should be done to fix the Department of Insurance and prevent any recurrence, it minced no words when it came to Quackenbush.

“From the Northridge rubble,” the report stated, “Mr. Quackenbush and his top deputies created an exploitative enforcement structure.” Quackenbush, the report concluded, “subverted the regulatory process . . . failed to provide adequate redress for some earthquake victims . . . misspent money extracted from insurers and diverted from state coffers . . . and, when the practices came to light, engaged in a cover-up in an effort to mislead the public and avoid responsibility for their actions.”

William Sirola, a spokesman for State Farm Insurance Co., described the report as “a tragic and scandalous tale.” In a settlement negotiated with Quackenbush, State Farm paid $2 million to a foundation set up by the commissioner.

Ostensibly, the money was to be used for scientific research into earthquake prevention. Sirola said the company’s reaction to reports that the money had been used instead for other purposes, including a $263,000 donation to a football camp attended by two Quackenbush children, was “frustration and disappointment to the point of utter and total disbelief.”

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Times staff writers Miguel Bustillo and Julie Tamaki contributed to this report.