5 Bills Addressing Quackenbush-Era Abuses Go to Davis

Under proposed laws approved by the California Legislature in its closing hours, former Insurance Commissioner Chuck Quackenbush would not have been able to use public money to promote himself on television, create nonprofit foundations without legislative approval or keep state studies of insurance company performance secret.

Five measures sent to Gov. Gray Davis for his signature this week--which have substantial insurance industry support--address some of the key abuses documented in several months of state investigation of the former commissioner, who resigned in July under threat of impeachment.

According to Davis spokesman Roger Salazar, “The governor has not taken a position on those bills but is expected to take a very close look at them.”

In addition to the proposed reforms of the commissioner’s office, the Legislature passed bills extending the time allowed for victims of the 1994 Northridge earthquake to file claims. A central element of the Quackenbush investigation was his use of confidential state studies--called market conduct examinations--of companies’ claims-handling practices to extract settlements from insurers after Northridge.

Between August 1997 and last April, when The Times first reported details of secret settlements that he negotiated with insurers based on those examinations, Quackenbush used some of the $19 million he collected from the insurers to advance his ambitions for higher office.

What the lawmakers declined to do in the last week of their 1999-2000 session was put restrictions on the commissioner’s ability to raise campaign money from the insurance industry, something Quackenbush did to the tune of $8 million.

Another proposed reform, a bill by state Sen. Jackie Speier (D-Hillsborough) giving voters the opportunity to restore the insurance commissioner as an appointed position, never even got to the Senate floor.

The legislation that did emerge from the hectic last week of the session had uncharacteristically broad support among Quackenbush’s legislative inquisitors and consumer advocates as well as the insurance industry.

“This is one of the rare times where you see a Speier and the insurance industry on the same page--both of us wanting to have a higher level of accountability on the part of the regulator,” said Dan Dunmoyer, president of the Personal Insurance Federation of California, a powerful lobbying group that represents several major insurance companies in Sacramento.

Jaime Court, an insurance specialist with the Santa Monica-based Foundation for Taxpayer and Consumer Rights, described the Quackenbush-related legislation as “a starting point.”

“When only the bills that win industry support pass, it is not a radical shift in the balance of power,” said Court. “But it is an advance with some significant ramifications for the type of outrageous behavior in which Quackenbush engaged.

“This marks the first time that both the industry and the Legislature felt the public’s heat,” Court said.

Speier, who chairs the Senate Insurance Committee, agreed.

“I think the Legislature can be pretty proud of stepping up to the plate . . . and hitting a double,” she said. “Historically, the legislation that comes out has been crafted by the insurance industry. This is the first year in which the consumers’ voices have been heard.”

The last related bill to pass shortly before midnight Thursday was possibly the most significant. Under the bill, SB 1805 by Sen. Martha Escutia (D-Whittier), the final versions of market conduct examinations would be posted on the Department of Insurance Web site to help consumers evaluate the performance of their insurers.

The names and addresses of customers and proprietary financial details would not be included in the postings. Also, in a last-minute compromise, the insurance industry won a 10-day period to draft a response, which would also be posted on the Web site, www.insurance.ca.gov.

Escutia, who earlier in the year outraged the insurance industry when she made the Northridge market conduct studies public, said she acted on behalf of the “public’s right to know.” Helping her fight to make the examinations public was the fact that 40 other states do so.

“We didn’t exactly flunk the test. No one can accuse us of doing nothing,” Assemblyman Fred Keeley (D-Boulder Creek) said, summing up the post-Quackenbush legislation. “But we are not going to get a chapter in ‘Profiles in Courage,’ either.”

In addition to the Escutia bill, the Legislature sent the governor SB 1524 by Sen. Liz Figueroa (D-Fremont), which limits the commissioner’s use of public money for self-promoting ads; SB 2107 by Speier and AB 481 by Assemblyman Jack Scott (D-Altadena) requiring legislative approval for disbursement of Insurance Department settlements; and SB 1899 by Sen. John Burton (D-San Francisco), extending the statute of limitations for victims of the Northridge quake to file claims.