New Insurance Laws Boost Public’s Rights

The scandal that drove state Insurance Commissioner Chuck Quackenbush from office provided new rights for consumers Sunday as Gov. Gray Davis announced his approval of laws allowing Northridge earthquake victims to reopen claims and requiring the state to disclose examinations of insurance companies’ conduct.

The two measures, which grew out of a legislative investigation of Quackenbush, California’s second elected insurance commissioner, were signed into law minutes before a Saturday midnight deadline for the governor to act on the final bills of the legislative year.

This year Davis plowed through 1,454 bills, but he left many until the final day, when he also signed legislation dealing with individual privacy rights, hate crimes and vehicle emissions. By midnight, he had signed 1,088 bills. He had vetoed 362 and allowed four to become law without his signature.

After a year dominated by hearings into the Quackenbush scandal, those measures spawned by probes of the commissioner’s activities were among the last to be considered by the Democratic governor.

The new laws give victims of the 1994 Northridge earthquake a one-year grace period--until Jan. 1, 2002--to revive claims for which they believe they have not been fairly compensated by insurers. The legislation (SB 1899) by Senate President Pro Tem John Burton (D-San Francisco) does not apply to people who won court judgments or whose attorneys have signed settlement agreements.

But consumer groups view a second measure (SB 1805) by Sen. Martha Escutia (D-Whittier) as more far-reaching. It lifts a veil of secrecy from Department of Insurance studies of companies’ claim-handling practices, by requiring that the final results be posted on the department’s Web site.

“No one should ever hide from open government,” Escutia said Sunday. “When these types of documents formed a basis for regulatory action, they most definitely should be open. I think if Mr. Quackenbush had in fact used his discretion to release these documents he probably would still be office.”

Those examinations, and the secrecy that surrounds them, were a pivotal part of the scandal that unfolded around the Republican Quackenbush, who until then had been considered a likely contender for the governor’s office or the U.S. Senate.

The disgraced commissioner left office in July after hearings revealed that he had agreed in secret settlements with insurance companies to stop such examinations of their conduct.

The agreements required six insurers to contribute to nonprofit foundations that the commissioner created. Funds from one of the foundations were used to pay for television ads featuring Quackenbush and designed to enhance his political image.

Preliminary examinations scrutinizing the companies’ claim-handling practices after the Northridge quake had found that some of the state’s largest insurers frequently low-balled payments and failed to disclose benefits to policyholders.

“This new law is the deterrent to future ‘insurance-gates,’ and it is probably more valuable in the long run for every consumer in the state than even the ability of those who were abused in the aftermath of Northridge to be able to refile their claims,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights.

Insurers Fear Massive Lawsuits

Insurance executives had lobbied heavily for a veto, fearing that the law permitting quake victims to refile claims would mean massive class-action lawsuits that could provide another financial blow to an industry that paid out $15.3 billion in Northridge claims.

Dan Dunmoyer, president of the Personal Insurance Federation of California, said industry leaders believed that few individual policyholders would seek to reopen claims. A greater worry was that the new law would give trial lawyers an opportunity to organize class-action lawsuits against insurers.

Burton, who gets much of his financial support from trial lawyers, said he couldn’t remember whether it was his staff or the trial lawyers who had suggested the legislation to him.

“All I know is that it’s a good thing and it’s a lesson to insurance companies who deal in bad faith with their customers,” he said.

Other insurance measures that Davis signed into law were bills by Sen. Jackie Speier (D-Hillsborough) prohibiting the commissioner from allowing insurers to contribute to nonprofit entities in lieu of fines (SB 2107), and by Sen. Liz Figueroa (D-Fremont) restricting the use of settlement money (SB 1524).

Davis also on Saturday signed a spate of measures to protect individual privacy and combat the growing crime of identity theft.

Chief among them was a bill, SB 129 by Sen. Steve Peace (D-El Cajon), that will establish an Office of Privacy Protection in the state Department of Consumer Affairs. The agency will be responsible for fielding consumer privacy complaints and developing ways to protect privacy.

Another was AB 2246 by Assemblyman Howard Wayne (D-San Diego), addressing concerns over businesses that carelessly toss away receipts bearing credit card numbers, signatures and other sensitive information. The new law will require businesses to take “reasonable steps” to destroy customer records containing personal information.

Davis signed AB 1862 by Assemblyman Tom Torlakson (D-Antioch), which requires the Department of Justice to keep a database of identity theft victims to assist them in clearing their names.

Davis vetoed legislation by Sen. Debra Bowen (D-Marina del Rey) that would have prevented bosses from snooping on their employees’ e-mail. As he did on a similar bill last year, the governor said employers own the computers and therefore have a right to monitor their use.

“I just fundamentally disagree with the governor’s rationale,” Bowen said. She equated e-mail to a phone call at work. “If you’re on the phone with your doctor or your child’s school, your boss can’t monitor or record your conversation.”

Davis signed two bills aimed at combating hate crimes. AB 1785 by Assemblyman Antonio Villaraigosa (D-Los Angeles) requires schools to report hate-motivated crimes to the state as part of the Department of Education’s standard school crime reporting form.

And the governor signed AB 1931 by Assemblyman Jack Scott (D-Altadena), which requires the state to provide training to school personnel on identifying hate violence on campus.

In the fight against smog, the governor signed an $18-million bill designed to encourage the purchase of “zero emission vehicles” by giving motorists a maximum $9,000 subsidy toward the purchase or lease of the low-polluting autos and trucks.

The bill (AB 2061) by Assemblyman Alan Lowenthal (D-Long Beach) is aimed at narrowing the price gap between typical gas-burning vehicles and low- and “zero”-polluting vehicles whose costs are much higher. The state grants of $3,000 per year will be offered for up to 36 months starting Jan. 1.

Lowenthal introduced the bill on behalf of the state Board of Equalization and Lubrizol Corp., manufacturer of an experimental alternative fuel.

In a written statement, Davis said the new law “will make zero emission vehicles (ZEV) a meaningful, long-term element of California’s air quality strategy.” He also said that “incentives and market assurances are needed to ease the transition to a self-sustaining ZEV market.”

Also on Saturday, Davis signed legislation that lifts a cloud of uncertainty hanging over California’s card clubs after a state Supreme Court ruling cast doubt on their legality. The bill, AB 1416 by Assemblyman Herb Wesson (D-Culver City), was the result of negotiations involving Davis, state Atty. Gen. Bill Lockyer, representatives of California’s 125 card clubs and their competitors, Indian gambling tribes.

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Times staff writer Carl Ingram contributed to this report.

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*HORSE TRACK BILL VETOED

Gov. Gray Davis rejected a bill aimed at improving conditions for stable workers. B1