Wilson Overrules Appointee on How to Handle Rebates : Insurance: Governor agrees with Garamendi on the need to move the Prop. 103 issue from state bureaucracy to the courts.
SACRAMENTO — Siding with Insurance Commissioner John Garamendi, Gov. Pete Wilson on Friday kicked aside bureaucratic underbrush that blocked the delivery of $2.5 billion worth of long-stalled Proposition 103 rebates to automobile and homeowner insurance customers.
Wilson declared in a 10-page statement that the rebate issues properly belonged in the courts, not hung up in administrative rulings by state government.
It was the second time the Republican chief executive reversed a decision by one of his appointees who had blocked Garamendi, a Democrat, from ordering insurance companies to make good on the long-promised refunds voters enacted in 1988.
Even so, the car insurance rebates, which would average slightly more than $100 to Southern California policyholders and less elsewhere, probably will not reach consumers anytime soon, if ever, because of expected court fights.
Wilson said that legal issues could be resolved in four months, an assertion challenged by Garamendi and some industry lawyers.
In sharp language aimed at both the politically ambitious Garamendi and insurance companies who have tenaciously fought rate rollbacks since voters enacted the reform initiative, Wilson declared that frustrated Californians want to “know what, if anything, Proposition 103 has accomplished. It is past time to end the grandstanding and epic foot-dragging. Enough is enough.â€
Wilson’s action had been sought by the Legislature and by Voter Revolt, sponsors of Proposition 103.
Voter Revolt attorney Ed Howard said the governor’s action “reveals that Wilson is afraid, for political reasons, to get directly in the way of Proposition 103 and is, instead, hoping the courts will be willing to do the bidding of the insurance industry.â€
Among other things, Proposition 103 promised car and homeowner insurance customers a 20% rollback in rates. The state Supreme Court upheld the measure, but said insurance companies cannot be denied a fair rate of return and ordered the insurance commissioner to establish regulations providing for such a return, the still unresolved issue.
Garamendi, who avoided any mention of Wilson’s criticism of him, said in a statement that the governor’s action drove a St. Valentine’s Day “stake through the heart of the insurance industry’s stall tactics.†He called Wilson’s decision a victory for consumers.
Industry executives dismissed the notion that the governor’s ruling handed a defeat to insurance carriers. “We understand the governor’s decision to force Proposition 103 into the fast lane. The sooner it breaks down under judicial scrutiny, the better,†said Thomas F. Conneely, president of the Assn. of California Insurance Companies.
Wilson’s action enables Garamendi, the state’s first elected insurance commissioner, to start hearings soon on rebate orders he issued last summer. Insurance companies protested that Garamendi had given himself unconstitutional “confiscatory†powers over their money in ordering the rebates.
Only the Automobile Club of Southern California has sent refund checks to policyholders in response to Garamendi’s order. A hearing is scheduled to resume Feb. 24 for another major company, 20th Century, which is challenging a $106-million rollback. Other hearings are expected for Mercury Casualty and the California State Automobile Assn.
Wilson’s director of the state Office of Administrative Law, Marz Garcia, an attorney and former GOP legislator, blocked implementation of the rebate regulations last month, drawing fire from Voter Revolt and the election-conscious Republicans and Democrats in the Legislature. Garcia’s office screens administrative rules for clarity, need and whether they are authorized by law.
Last summer, Garcia stirred controversy by rejecting temporary regulations proposed by Garamendi to implement the rollbacks. Garcia was reversed by Wilson. The latest Garamendi regulations, essentially, extended the temporary rules to make them permanent.
While reversing Garcia a second time, Wilson defended his appointee as an official who had “scrupulously†fulfilled his duties without bias in favor of the insurance industry. But Wilson said that if he had upheld Garcia, it would have done nothing to resolve the dispute, only created further delays.
Now, Wilson said, the issues could be resolved in the courts in four months. “What is needed is clear guidance from the courts,†Wilson said.
Wilson also announced he wanted no further involvement as the referee of Proposition 103 fights between Garamendi and Garcia. “I am no longer willing to intervene in these administrative matters when doing so achieves only further delay in reaching needed judicial resolution,†Wilson said.
Theoretically, at least, by washing his hands of further appeals by Garamendi of Garcia’s rulings, Wilson leaves future questions firmly in Garcia’s hands, blocking an administrative appeal route to Garamendi, who then would have to turn to the courts.
Fredric Woocher, an attorney and adviser to Garamendi, voiced doubt that rebate issues could be cleared up in court within four months after all the rebates were ordered, as Wilson suggested. “Given the insurers’ behavior in the past and particularly the Office of Administrative Law’s behavior, I don’t see how it can get finished in 120 days,†he said.
Woocher indicated that pushing the issue through the trial and appellate courts alone could take about a year.
However, Marjorie Berte, the governor’s insurance adviser, said she believes 120 days was enough to start a court test on the validity of the regulations. “If there’s any message in this whole thing, it is ‘Get this along to the point where someone can make a real decision.’ This process has got to get to court where they can make a substantive decision,†she said.
On the industry side, Kent Keller, an attorney representing more than 30 insurance companies in rollback proceedings, said he believes the governor’s action may have handed Garamendi unexpected and uncertain new complications.
“This is like a mystery,†Keller said. “You go all the way through it, and you say, ‘Whoops, it didn’t come out the way I thought it would when I started reading it.’ â€
NEXT STEP
Rebates to consumers required under Proposition 103 remain a long way off. The next step will apparently be a resumption in an administrative hearing to determine whether Insurance Commissioner John Garamendi’s order for a $106-million rebate by one company, 20th Century, is fair. If, as expected, Garamendi rules that it is, 20th Century is expected to appeal to the Los Angeles Superior Court to reverse the order. When a decision is reached on that court level, it is likely to be appealed to the state Court of Appeal and then to the state Supreme Court. Federal court action is also possible. Garamendi attorney Fredric Woocher estimated Friday the whole process could take more than a year.
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