Judge Changes Mind on Opening Northridge Reports

In an unusual about-face, a Sacramento judge notified the state Senate on Wednesday that he intends to stop the dissemination of confidential Department of Insurance reports that found thousands of examples of mishandled claims after the Northridge earthquake.

Reversing his own decision, Superior Court Judge Joe S. Gray said he plans to order the Senate to “return all copies of the reports it has in its possession” and to provide him with a list of all people who were given access to the documents.

The judge’s decision is a rare victory for Insurance Commissioner Chuck Quackenbush, who became embroiled in a scandal after it was revealed that he had entered secret settlements with the companies examined by the reports.

It is also a triumph for the insurers, who vigorously opposed the release of the reports.

Quackenbush promised to stop any further review of the companies’ handling of Northridge claims in return for their agreement to contribute millions of dollars to foundations he created. The foundations, now under investigation by state Atty. Gen. Bill Lockyer, used the funds for public service advertisements featuring the commissioner and for grants to charitable organizations that had connections to him.

The summary pages of the reports, called market conduct examinations, were made public by a Senate Judiciary subcommittee and posted on the Internet.

Last week, Gray denied a request by Quackenbush and two insurance trade associations that he order the Senate to remove the posted reports. “Even though the conduct is improper, I cannot enjoin it,” Gray said.

But on Wednesday, without explaining why he had changed his mind, Gray issued a statement directing attorneys for both sides to appear before him June 27 “to show cause why the court should not reconsider its decision.”

The judge’s announcement was the first positive news in recent weeks for Quackenbush, who has been under investigation by two legislative committees. Several lawmakers have called for his resignation, and some have talked openly of impeachment.

“It appears the judge has rethought the appropriateness of having stolen documents being distributed freely by members of the Legislature,” said Deputy Insurance Commissioner Dan Edwards.

Sen. Martha Escutia (D-Whittier), chairwoman of the subcommittee, said the judge’s action was disappointing but would not deter her from “fighting for a full and open process.”

She said she still believes the public has a right to know “what happened after the Northridge earthquake as far as how claims were handled and whether consumers were protected.”

But she added that the Senate would have to respect “the fact that the judge, on his own motion, is reconsidering his decision.”

A consumers group, the Foundation for Taxpayer and Consumer Rights, issued a statement saying the judge’s change of heart would deny consumers valuable information.

“This information is essential to understanding what’s been happening under Quackenbush’s watch and understanding what’s gone wrong,” said Douglas Heller, a foundation spokesman. “This is the people of California’s information. This is not Quackenbush’s information and certainly not the insurance companies’ information.”

California law gives the insurance commissioner jurisdiction over whether the reports should be public.

The reports, called market conduct examinations, reviewed a sampling of claims from three major companies--Allstate, State Farm and 20th Century, although settlement agreements stopped the reports from being completed. The documents detailed 2,500 instances in which examiners said claims had been mishandled.

The violations cited by the examiners included lowballing and delaying settlements. The companies have contended that they could present proof that the findings were erroneous.

Judge Gray’s action followed a decision earlier in the day by another Sacramento Superior Court judge, John R. Lewis, to extend his order forbidding the California Research and Assistance Fund to spend any of its remaining assets.

Lockyer has contended that the fund, one of the foundations created by Quackenbush, was a “sham” operation that had been controlled by former deputy commissioner George Grays, a key aide to the commissioner.