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Insurers seek to make agreements valid that allowed them to avoid as much as $3 billion in penalties. California Department of Insurance Commissioner Quackenbush was forced to resign after donations of $12.8 million were made by insurers to educational foundations set up by Quackenbush in lieu of the penalties.

Read more about the Quackenbush scandel at http://www.injuredworker.org/Library/Quackenbush.htm

Los Angeles Times - August 22, 2001

Insurers Seek to Uphold Agreements
From Associated Press

Five companies that cut millions of dollars in settlement deals with former state Insurance Commissioner Chuck Quackenbush have filed court papers trying to prove the agreements are legally binding--despite a lawsuit by the state attorney general intended to wipe them out.

If the companies fail, they will face a fresh investigation into allegations that they low-balled hundreds and possibly thousands of people while paying damage claims linked to the 1994 Northridge earthquake.

"If there is a full rescission, we will get the commission to take a look at each one of these companies and make an evaluation of their conduct," said Harry Low, head of the state Department of Insurance. The subsequent penalties could range "from zero into many, many zeros with a number in front of it," Low said.

The insurers, meanwhile, insist the funds should stay intact because they were created in a good- faith agreement with Quackenbush, who eventually resigned amid allegations that he misused the money.

"We reached what we felt was a fair settlement," State Farm counsel Ken Cooley said. "I guess we just don't see that, in any of this process, there is a reason why it makes sense to reopen things."

The 1994 Northridge quake, considered the most expensive natural disaster in state history, killed 72 people, caused an estimated $15.3 billion in damage and generated more than 600,000 claims.

Soon afterward, insurance firms, including Allstate Insurance Co., State Farm General Insurance, Farmers Insurance Exchange, Firemen's Fund Insurance Cos. and 21st Century Insurance Co., were accused of undervaluing customer claims.

In 1999, the companies settled with Quackenbush, who then headed the Department of Insurance, to avoid paying as much as $3 billion in penalties involving the handling of those claims. The settlement called for the insurers to create and finance nonprofit funds to benefit the public, including the California Assistance and Research Fund now targeted by the state lawsuit.
"The settlements were completely improper," said Harvey Rosenfield, a consumer advocate who co-authored a 1988 ballot initiative making the office of insurance commissioner an elected post. "They do not serve any public interest."