State Senate Panel Urges an Array of Insurance Reforms

A day after the state Assembly declined to curb insurance company donations to candidates for the post of insurance commissioner, a Senate committee Tuesday recommended broad reforms in the wake of the Chuck Quackenbush scandal.

The legislative and administrative reforms were contained in the Senate Insurance Committee’s report on its five-month investigation of former Insurance Commissioner Quackenbush, who quit last month rather than face impeachment.

Among other recommendations, the report urged that state Insurance Department reviews of claims handled in the wake of the 1994 Northridge earthquake be reopened and that secret settlements Quackenbush made with the insurance companies involved be rescinded.

“The orchestrated extraction of millions of dollars from insurers to secure the political fortunes of the former commissioner was an egregious affront to the public trust,” committee Chairwoman Jackie Speier (D-Hillsborough) said in releasing the report.

One of the key recommendations in the document, titled “The Department of Insurance: In Rubble After Northridge,” came at least a day too late. The proposal to restrict campaign contributions from insurance companies that have regulatory business pending before the commissioner was defeated in the Assembly shortly before midnight Monday.

The lower house voted 34 to 27 against the bill (SB 953) by Speier, which would have limited insurers to contributions of $250 for 12 months before and six months after pending regulatory action. Although the Democratic leadership supported the measure, it fell far short of the 41 votes needed to pass. Nineteen members did not vote.

The bill was a reaction to the more than $8 million in campaign contributions Quackenbush accepted from the industry he regulated for six years. The Senate report, which had bipartisan support, urged that campaign contributions be banned or limited to “remove the taint of possible conflict from the office of insurance commissioner.”

But in the Assembly on Monday, not one Republican voted for the Speier bill. And 17 Democrats, including nine from greater Los Angeles, broke with the leadership and either voted against the measure or did not vote.

Two other reforms recommended in Tuesday’s Senate report have cleared at least one house of the Legislature, including a bill extending the statute of limitations on lawsuits against insurers for Northridge-related claims. Another Speier measure (SB 2107) would ban the kind of settlements negotiated by Quackenbush without legislative approval.

Other legislation, SB 1524 by Sen. Liz Figueroa (D-Fremont), would prohibit use of settlement money for public service television spots that feature the insurance commissioner. On Tuesday, the Assembly approved the measure, which now goes back to the Senate.

Probably the most controversial Quackenbush-related bill still outstanding in the closing days of the session is SB 1805 by Sen. Martha Escutia (D-Whittier). It would make public the heretofore confidential Department of Insurance studies of insurers’ handling of claims.

The insurance industry strongly opposes the bill, which has some GOP support. If the bill survives in committee, it is not expected to come to a floor vote until Thursday.

After the Northridge quake, Quackenbush and his staff used the department’s studies of claims handling--sometimes employing fake newspaper articles as props--to threaten insurers with fines and penalties so they would make “donations” to private foundations. Quackenbush then used the money for political polling and television ads, among other endeavors.