Garamendi Wins Fight on Prop. 103 : Insurance: Superior Court judge says he may scrap Gillespie’s rollback standards and issue his own. Decision is due next week on how he may proceed.

A Los Angeles judge Wednesday said Insurance Commissioner John Garamendi is free to scrap predecessor Roxani Gillespie’s Proposition 103 rollback standards and issue his own.

But Superior Court Judge Dzintra Janavs, at a hearing on a lawsuit brought by 82 insurance companies in their continuing fight against implementation of the reform measure, reserved until next week a decision on how Garamendi may proceed.

Janavs said she found some merit in the insurers’ argument that the speedier hearings Garamendi has announced might violate their right to due process. Garamendi wants to hold hearings for about two weeks before issuing his new standards. Similar hearings lasted four months under Gillespie.

But the judge also suggested that if she issues an injunction to stop the hearings, Garamendi might be able to issue the new regulations on his own authority. Any companies then ordered to pay rebates of 1989 premiums could challenge the validity of the regulations in court.

Garamendi hopes to get rebate checks into customers’ hands by summer, breaking a 2 1/2-year legal stalemate over implementation of Proposition 103. Although the new commissioner hasn’t said so, it is widely believed that he is working for bigger rebates than Gillespie was willing to give.

The 82 companies, including such big sellers as State Farm, Farmers, USAA and Travelers, are part of a hard-line faction in the industry that has battled the Proposition 103 rollbacks from the beginning. Some other big companies, such as Allstate, 20th Century and the Automobile Club of Southern California, by contrast, have declined to join the latest lawsuit and appear ready to negotiate.

Proposition 103, as passed by the voters, called for a rollback of 20% of certain 1989 premiums including personal auto, homeowners and many commercial lines. But in response to an insurer lawsuit, the state Supreme Court ruled that a company had to receive a “fair rate of return” before any rollback could be calculated. That raised the possibility that rebates might be given on a smaller percentage of premiums or in some cases not at all.

Since the high court decision nearly two years ago, there has been a struggle to define what constitutes a fair rate of return and how it should apply to specific companies. Gillespie, a Republican, set 11.2% as a standard, but opened the way to variances. Before her regulations could be tested in court, Garamendi, a Democrat, was elected to replace her.

The heart of the argument in the insurers’ suit is that Gillespie’s regulations, which they intend to challenge as well, constitute a “final action” that Garamendi cannot revise.

But Janavs said Wednesday “one administrator’s actions cannot bind her successor.”