Reform Bill Would Publicize Insurer Data

In a reform linked to the California insurance commissioner scandal, confidential state studies of how insurance companies handle policyholder cxlaims would become public under a last-minute bill that passed the Legislature Thursday and went to the governor for his signature. Under the measure by Sen. Martha Escutia (D-Whittier), the final versions of such studies, called market conduct examinations, would be posted on the Department of Insurance Web site to help consumers evaluate the performance of their insurers.

At the urging of insurance companies, names and addresses of customers and confidential financial information would be excluded from the electronic postings. In addition, the insurers won a 10-day period to prepare a response, which also would be posted on the Web site, https://www.insurance.ca.gov.

As a result of the changes, at least one powerful insurance lobby, the Personal Insurance Federation of California, agreed to support the bill. The American Council of Life Insurance, representing smaller carriers, remained opposed.

Consumer advocates heralded the Escutia bill, SB 1805, as the most significant reform to emerge after months of Assembly and Senate investigations of former Insurance Commissioner Chuck Quackenbush, who resigned in July under threat of impeachment.

“This is much-needed sunshine on insurer abuses,” said Doug Heller, who represents the Santa Monica-based Foundation for Taxpayer and Consumer Rights. Forty other states make market conduct examinations public.

Assemblyman Thomas Calderon (D-Montebello) carried the bill in the lower house, where it passed 47 to 20. It later was approved by the Senate 24 to 4.

“This is a major step forward to protecting consumers and at the same time being sensitive to insurance companies,” Calderon said.

On Gov. Gray Davis’ desk, he bill could face a hitch. Clark Kelso, whom the governor appointed as interim head of the Department of Insurance, argued against the proposal, contending that it would restrict the department’s ability to negotiate with insurers to reopen the Northridge earthquake claim files.

Market conduct examinations were central to the Quackenbush probe.

According to testimony in legislative hearings, Quackenbush and his senior deputies used the examinations, conducted by state staff after the 1994 Northridge earthquake, to extract millions of dollars in secret settlements from insurance companies.

The market examinations were highly critical of claims practices by such major insurers as State Farm, 20th Century and Allstate, but were never released publicly by the Department of Insurance. They were, however, leaked to the Legislature and then to The Times, and were subsequently posted on a Web site until a judge ordered them removed.

Instead of assessing fines against the companies based on the reports, Quackenbush allowed them to make “voluntary donations” to nonprofit foundations under his control.

Two other companies, Fireman’s Fund Insurance Co. and Farmers insurance, were spared by Quackenbush from the market examinations in exchange for large donations to the special funds, which he announced were created for earthquake relief and education.

An investigation by state Atty. Gen. Bill Lockyer showed that the foundations spent most of the money on television commercials, political polls and grants to community groups, including a $263,000 gift to a Sacramento football camp attended by two Quackenbush children.

The intent of the complicated foundation scheme, an Assembly report concluded earlier this month, was “to bolster Commissioner Quackenbush’s political prospects and financially benefit his political associates and friends.”

Other bills passed in the final days of the legislative session also addressed the Quackenbush case. One, SB 2107 by state Sen. Jackie Speier (D-Hillsborough), would ban payment of settlement monies to nonprofit organizations without legislative approval. Another, SB 1524 by Sen. Liz Figueroa (D-Fremont), would prohibit the insurance commissioner from appearing in self-promoting ads purchased with insurance settlement money.

Like the Escutia bill, those measures are also before Davis for signature.

The centerpiece of the reform legislation related to the Quackenbush case, a Speier bill to restrict political contributions from insurance companies with business pending before the commissioner, failed 34 to 27.