Consumer Advocates See Cover-Up in Quackenbush Scandal

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Los Angeles– Consumer advocates warn that Insurance Commissioner Quackenbush and one or more insurance companies may be attempting to cover up evidence of illegal activities in the growing scandal over Quackenbush‘s treatment of insurers who were found to be engaged in massive lowballing and mishandling of Northridge earthquake claims.

Previous reports in the Los Angeles Times determined that Quackenbush ignored extensive audits prepared by career staff at the Insurance Department which recommended $233 million in repayments to policyholders and $3.4 billion in fines by State Farm and other insurance companies. The Commissioner has not yet responded to FTCR’s request to provide access to these audits. Instead, Quackenbush ordered the insurers to make $12 million in tax deductible donations to non-profit foundations apparently controlled by Quackenbush. Apparently, the foundations have funded television advertisements featuring the Commissioner.

Today’s Los Angeles Times reports a new and even more disturbing twist. In the case of Fireman’s Fund, despite numerous consumer complaints, Quackenbush agreed not to audit or even mention the company in future Northridge matters in exchange for a $550,000 donation to the foundation and a promise by Fireman’s Fund that it would audit itself. Moreover, one day later, the company made a $20,000 political contribution to Quackenbush.

The Times’ story quotes both the Commissioner and Fireman’s Fund as saying there was no connection between the political contribution and the settlement. Both stated that there were numerous consumer complaints against Fireman’s Fund for its handling of its policyholders’ claims, but both stated that severity of the complaints relative to the other companies did not warrant more than the tax-deductible donation. Since Mr. Quackenbush has refused to disclose any of these documents to the public, it is not clear how Fireman’s Fund could determine that its misconduct was modest by comparison.

“There’s no doubt in our minds that Insurance Commissioner Quackenbush, confronted with a scandal that could ultimately cost him his job, is now communicating with insurance companies in an effort to agree on an explanation for what obviously appears to be a matter of trading official actions for payments to foundations that benefit Mr. Quackenbush personally,” said Harvey Rosenfield, President of FTCR. “In addition to all the documents he has so far refused to disclose, we’d like to examine his phone bills to see who he and his staff have called as he tries to get all his ducks in a row.”

Added FTCR advocate Doug Heller, “FTCR has already requested that the Attorney General investigate this matter to determine if the improper conduct constitutes criminal violations of the law. Any attempt by the Commissioner or his deputies to cover up evidence of misconduct by conspiring with insurance industry executives would, in itself, be a serious offense.”


Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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