Insurance Journal

Quackenbush Grilled; Admits No Knowledge of Expenditures

April 28, 2000 8:49 a.m. PDT

California Insurance Commissioner Chuck Quackenbush was grilled for nearly three hours before the Assembly Insurance Committee yesterday about his handling of Northridge Earthquake penalties, admitting "mistakes made in judgement" about how the money was spent.

Controversial donations totaling $12.8 million were made by insurers to educational foundations set up by Quackenbush in lieu of paying hefty fines for mishandled claims resulting from the 1994 Northridge quake. A big chunk of the money deposited in the California Research and Development Foundation had been given to social service groups, minority community projects and athletic programs. Quackenbush reportedly called the contributions part of an "outreach to minority communities that have been historically underserved by the insurance industry."

When legislators asked how much of the $12.8 million had gone to victims of the Northridge quake, Quackenbush's staff said that $6 million was earmarked for losses and would be distributed soon.

Although the members of the Assembly Insurance Committee that questioned the Republican Commissioner and his staff of their alleged wrongdoing were mostly Democrats, the Los Angeles Times reported that one of Quackenbush's toughest critics was actually a fellow Republican, Assemblyman Tom McClintock.

McClintock's district (Northridge) was the site of the worst damage in the 1994 earthquake. "Either [insurance companies] violated the law and should have been fined or they were innocent and should have been left alone," McClintock said.

When questioned about George Grays, a former campaign manager who resigned earlier this month, Quackenbush stressed that he had no knowledge of expenditures by the foundation. The Commissioner was also questioned about former Chief of Staff Bill Palmer, a lawyer who drafted most of the foundation papers. Quackenbush acknowledged that Palmer had led the negotiations with Farmers, including the controversial clause in the agreement that was reached with the company. Deputy Commissioner David Langenbacher said he signed the Farmer's agreement on Quackenbush's behalf.

During the hearing, legislators allowed Quackenbush and his staff to explain their actions. Quackenbush admitted there was a problem. Several issues will be examined in future hearings. No date has been set.