INSURANCE: DOCUMENT ACCUSES DEMOCRATS OF HYPOCRISY. LEGISLATIVE COUNSEL CRITICIZESCOMMISSIONER.

Los Angeles Times

As the California Assembly prepared for its first public hearing today probing state Insurance Commissioner Chuck Quackenbush‘s activities, his political aides issued a 25-page defense of the commissioner’s handling of Northridge earthquake penalties.

The Republican commissioner struck out at Democrats, saying their criticism of his decisions “doesn’t pass the hypocrisy test.”

Quackenbush said Gov. Gray Davis, Atty. Gen. Bill Lockyer and three legislators all recently appeared in the same kind of television public service spots that have made him the subject of criticism.

Quackenbush appeared in television ads aired in the state’s major cities urging people to call an 800 number to learn to prepare for earthquakes. The $ 3-million ad campaign was financed by a foundation that Quackenbush created with penalties he assessedcagainst major insurers for their handling of Northridge earthquake claims.

Davis and the three legislators were featured in ads dealing with census information. Lockyer’s $ 234,000 ad campaign dealt with a gun buy-back program.

A cover letter from Rob Stutzman, a media specialist hired by Quackenbush‘s political committee to help prepare for the hearing,
said the ad appearances by the Democrats “suggest that the commissioner’s accusers are flirting with blatant hypocrisy in their
politically motivated attacks upon the commissioner.”

In other developments:

* The legislative counsel, legal advisor to the state Senate and Assembly, released its formal opinion that Quackenbush exceeded his

power when he created controversial earthquake research and education foundations with insurance company money.

In a 12-page written opinion, Bion M. Gregory elaborated on an earlier finding that Quackenbush acted outside his authority in diverting the money to the two nonprofit foundations. The counsel told inquiring state Sen. Jackie Speier (D-Daly City) that even if the foundations created with $ 12.8 million extracted from insurance companies were beneficial,” they were still beyond Quackenbush‘s power to create.

Further, the counsel suggested that the commissioner would lose in court if any of these foundations were challenged. The California Supreme Court, Gregory wrote, “would not permitan administrative agency to enlarge a remedy beyond that which is clearly provided for by statute.”

* State Sen. Tom Hayden (D-Los Angeles) seized the moment to push through the Senate Insurance Committee a long-smoldering bill creating an insurance watchdog. Proponents said the bill (SB 1738) responds to the kinds of alleged abuses now engulfing Quackenbush.

The legislation would create an independent, nonprofit corporation of insurance policyholders and have them represented at proceedings of the Department of Insurance, the Legislature and the courts. The corporation, financed by voluntary $ 10 memberships from policyholders, would also provide information on the cost and quality of insurance services.

Also under the bill, insurance company mailings and those from the
Department of Motor Vehicles would include information inserted by
the proposed “Insurance Policyholder Assn.” Health insurers would be exempted.

The bill, introduced before the Quackenbush controversy erupted, now goes to the Senate Appropriations Committee. It was opposed by the insurance industry and sponsored by the Foundation for Taxpayer and Consumer Rights.

* Chris Quackenbush, the commissioner’s politician wife, defended her spouse in an angry letter to a newspaper serving their suburban Sacramento community. Calling her husband a “strong likely candidate for governor, senator or other office,” she lamented that he is suffering “a barrage of groundless allegations and innuendo pushed by the envious and ruthless politicians who want him neutralized.”

The letter, in the Rio Linda-Elverta News, said critics have “overreached by casting his . . . outreach programs as somehow bad. . . .

“They resent his ability to deliver results to worthy groups instead of the lip service they have received from other politicians,” she wrote.

“The magnitude of their venom shows how frightened they are of Chuck’s popularity.”

Chris Quackenbush lost a bid for a Sacramento-area state Senate seat in 1998. Campaign finance reports show that the commissioner funneled $ 250,000 into her campaign and helped retire her campaign debt–which included a mortgage on their home–with donations he collected from insurance companies.