Consumer Group Asks for State Investigation; Possible $35 Million in Fines

Los Angeles–California Attorney General Bill Lockyer and the state’s Fair Political Practices Commission have been asked to investigate nearly $18 million in contributions to the insurance industry’s campaign against Propositions 30 and 31 on the March 7 ballot. Propositions 30 and 31 are referenda through which insurers seek to undo consumer protection laws signed by Governor Davis last year. The laws would allow injured accident victims the right to sue an at-fault driver’s insurance company if the insurer unnecessarily denies, delays or low-balls a legitimate claim.

According to the non-profit, non-partisan Foundation for Taxpayer and Consumer Rights (FTCR), “No on 30 and 31” contributions by a handful of insurers may have been directed by foreign corporate parents or by foreign members of the company’s board of directors. It is illegal under California law for a foreign corporation or a non-citizen officer of a U.S. subsidiary to contribute to a ballot initiative, recall or referendum measure.

According to the research:

• Farmer’s Insurance Group, a subsidiary of Zurich Financial Services of Switzerland, has contributed $15.75 million. A key board member of Farmer’s, David Allvey, is apparently a British citizen listed as the Chief of Corporate Operations for Zurich Financial Services.
  

• Interstate Fire and Casualty (IFC), a company that is not a licensed insurer in California, has donated $1.59 million. IFC is an affiliate of Fireman’s Fund and is owned by Allianz A.G. of Germany.
  

• Fireman’s Fund, which has made three thousand dollars worth of non-monetary contributions, has the German chairman of Allianz, Henning Schulte-Noelle, on its board.
  

• CGU Corporation, which has contributed $387,920 to the No on 30 and 31 campaign, appears to be completely controlled by its British parent company, CGU plc.

“It is our concern that decisions directing funds to the insurance industry’s campaign are being made by the foreign corporations or the foreign officers of their subsidiaries, thereby violating §85320 (of the California Government Code),” FTCR stated in a letter to Attorney General Bill Lockyer.

If it is found that the decisions to contribute to the anti-30 and 31 campaign were made by foreign corporations, then both the companies and the campaign committee could each be fined for the full amount of the contributions — fines totaling $35.46 million. The committee — Californians Against Fraud and Higher Insurance Costs — has received at least $44 million for its campaign; 100% of the contributions as of January 22, 2000 have come from insurance companies.

“$17 million dollars from any source can change the outcome of an election,” said Douglas Heller, consumer advocate for FTCR. “In this instance European companies seem to be funding a campaign to overturn a state law which protects consumers when insurance companies don’t pay claims. It is particularly offensive since some of these very companies have been targeted by the Department of Insurance because, for over fifty years, they have refused to pay insurance claims to Holocaust victims.”

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