Special Interest Background Compromises Nominee’s Neutrality on Insurance Issues at Office of Administrative Law

Santa Monica, CA — Governor Schwarzenegger’s appointee to lead the Office of Administrative Law (OAL has been an insurance industry lobbyist for several years and should agree to recuse himself from review of insurance regulations if he is confirmed to the post, according to the non-partisan Foundation for Taxpayer and Consumer Rights (FTCR). William Gausewitz, who had been the Assistant Vice President for State Affairs for the American Insurance Association prior to his appointment, is scheduled to face the Senate Rules Committee for his confirmation hearing tomorrow.

The OAL determines whether or not regulations promulgated by state agencies comport with California statutes. The agency has the power to reject regulations that are deemed inconsistent with state law and is the final hurdle for every regulation put forward by agencies.

According to FTCR, the Office of Administrative Law demands a neutral arbiter to ensure a fair and proper vetting of proposed regulations. As a lobbyist for the insurance industry, Gausewitz’ strong opinions on insurance policy will undermine the neutrality and credibility of the OAL and render the agency inappropriately biased on insurance matters, the consumer group said. At Wednesday’s hearing, FTCR will ask the Senate Rules Committee to withhold Gausewitz’ confirmation as Director of OAL unless he agrees not to intervene when insurance matters are before his agency, and instead agrees to defer those matters to others within the agency.

“To have an insurance industry lobbyist making the final call on rules that regulate the insurance industry and affect consumers, businesses and workers impacted by that industry would undermine public confidence in government and the administration,” wrote Douglas Heller, the Executive Director of FTCR in a letter to Gausewitz. “If this conflict is not addressed, every action taken by the OAL would be subject to the concern that rulings were motivated by the special interests that wield power in the administration.”

FTCR pointed to the short tenure of Marz Garcia, a former state Senator, as the head of the OAL in the early 1990s as an example of how powerful the post can be. In 1991 and 1992, still an unconfirmed appointee, Garcia refused to approve regulations, promulgated by then-Insurance Commissioner John Garamendi, which implemented the rate rollback provision of Proposition 103. Garcia used the OAL to block the rightful refund of billions of dollars in overpaid premiums to California motorists and other consumers. His obstructionist abuse of the power of OAL only ended when the Senate Rules Committee withheld confirmation and forced Garcia out of office.

In coming months, the OAL may consider proposals to implement new regulations concerning the implementation of Proposition 103‘s rules on ZIP-code based auto insurance rates. Gausewitz and his former insurance industry employer, have been vociferous opponents of the new rules. Gausewitz could also face regulations regarding homeowners’ insurance protection issues that he has aggressively fought while lobbying for insurers as well as rules related to the new workers’ compensation law, which the American Insurance Association actively lobbied.

“Certainly, the administration could not deny that there is sufficient competence among the OAL staff to handle the review of insurance regulations without your involvement,” FTCR wrote in the letter to Gausewitz. “If you, or the administration, is unwilling to accept such an agreement, then we would have to assume that your ties to and bias toward the insurance industry was a chief reason for your appointment.”

The confirmation of Gausewitz is the second Schwarzenegger appointment that FTCR has challenged. Last week, the Senate Rules Committee confirmed the appointment of Charlene Zettel to head the Department of Consumer Affairs. Consumer groups argued that as a lawmaker, Zettel’s record was decidedly anti-consumer, which should have disqualified her from the post of Director of Consumer Affairs.

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