Quackenbush faces a clouded political future

When seven of the top nine officeholders in California (including both U.S. senators) are Democrats, it seems poor form, at first blush, to apply serious scrutiny to one of the two Republicans. But state Insurance Commissioner Chuck Quackenbush’s latest showing of extreme favoritism to the insurance industry he is supposed to regulate, not to mention state attorney general and Fair Political Practices Commission (FPPC) investigations, virtually requires it.

Quackenbush, 45, is a well-scrubbed, moderate Republican from Silicon Valley who spent eight years in the Assembly before running for the job in 1994, succeeding Democrat John Garamendi and winning the office in the best GOP year in decades. But even then he was compromised by an insurance industry that contributed several million dollars to him, more than three-fourths of all the money he raised that year. Indeed, some agents for Allstate Insurance were caught operating phone banks on his behalf and disguising themselves as police officers, for which Quackenbush later apologized.

Given his latest troubles and charges of favoritism, Quackenbush is either stupid or stunningly blind to appearances of impropriety. Or, worse, depending on what the investigations may reveal, he may have committed crimes.

Whatever the outcome, his conduct is continuing evidence that the powerful regulatory job he holds should perhaps once again be awarded by way of gubernatorial appointment rather than be an elective office that relies so heavily on campaign contributions. The job was appointive through the 1980s, when the last appointee, Roxani Gillespie, came under fire for also being too favorably disposed to the insurance industry. The drafters of Proposition 103, an insurance initiative that voters approved in 1988, included a provision to make the office elective.

Quackenbush’s actions, as revealed in recent detailed reports in the Los Angeles Times and The Bee, included rejecting recommendations from his own legal staff to fine several large insurance companies hundreds of millions of dollars. According to internal investigations, these companies — State Farm, 21st Century and Allstate — cheated policyholders of claims they filed after the 1994 Northridge earthquake in Los Angeles. They continually underestimated claims and failed to impart important benefits information to their customers. “Staff lawyers,” the Times article said, “found the evidence presented in the reports so compelling that they not only recommended fines, but also proposed that the companies contribute hundreds of millions of dollars to a special fund to repay earthquake victims whose claims had been improperly handled.”

But in an era when “politician” and “self-serving” have become synonyms for each other, Quackenbush took “self-serving” to a new level. Instead of pressing for the proposed fines and special fund, Quackenbush decided to settle with the insurance firms. They paid into a “research and education” foundation that spent $3 million airing television advertisements in Los Angeles on earthquake preparedness.

Guess who starred in the ads? Yes, Chuck Quackenbush. State Farm paid $2 million, 21st Century paid $6 million, plus a $100,000 fine, and Allstate paid $2 million. Since TV exposure is the currency of the realm for any politician with statewide ambitions, Quackenbush thus slapped the wrists of these companies and used the proceeds to advance his own political interests. Their contributions were minuscule compared to the fines his legal staff had recommended.

Last week, The Bee reported that the FPPC is also investigating claims that Quackenbush may have violated state conflict-of-interest laws by accepting some $300,000 in campaign contributions from companies his office regulates while regulatory actions were pending. The Bee also reported that some title companies told state Sen. Jackie Speier they felt extorted by the commissioner into contributing to yet another foundation, a nonprofit Escrow and Title Insurance Consumer and Education Fund, again in lieu of fines for alleged violations.

“It would appear,” Speier told The Bee, “that great pressure was applied on the companies to get them to contribute to the fund. Extortion was the word used to describe the actions of the insurance commissioner.”

Quackenbush and his top aides have denied any wrongdoing, saying that giving educational information to consumers was a better way to stop illegal insurance company practices than fining wrongdoers. The companies also denied wrongdoing, saying the proposed fines were so huge they never would have paid them and would have challenged them every step of the way in court.

Nevertheless, Quackenbush came into office under a cloud — namely, that the insurance industry bought his office for him. And well-meaning or not, his actions in office have only served to underscore those initial worries.

Politically, it’s hard to see where Quackenbush goes from here in electoral office, even if he is cleared of improper conduct. Because his office was not established until 1990, the year the term limits initiative was approved, which limits statewide officeholders to two terms, he is not technically termed out in 2002. But it’s hard to see him winning another four years, given his track record.

Perhaps a high-powered insurance industry job awaits him. That would be an appropriate “reward” for services rendered.

Political editor John Jacobs can be reached at [email protected]”>[email protected] or at (916) 321-1914.

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