Wilson Tells Garamendi to Proceed With Rebates : Insurance: Governor overrules his appointee. But obstacles remain before the public can receive checks.
Gov. Pete Wilson overruled one of his own appointees Monday and gave Insurance Commissioner John Garamendi the go-ahead to order insurers to rebate more than $2.5 billion to California consumers under Proposition 103.
Wilson said in a statement that “The public’s interest would not be served by further administrative delay” in moving ahead with the rebate orders and that any challenges “are more properly addressed by the courts.”
The decision by the Republican governor, bucking the insurance industry for the first time as the state’s chief executive, means that Garamendi is free to issue rebate orders to hundreds of insurance companies.
The insurance commissioner had appealed to Wilson in strong language to override a Sept. 3 decision by the director of the Office of Administrative Law, Marz Garcia, that blocked emergency regulations needed before the rebates could be ordered. Garamendi expressed exhilaration Monday at the governor’s decision and said he would issue the first rebate orders to a substantial number of companies next week.
“We’re very pleased,” Garamendi said. “It means the rollbacks will proceed. . . . I think the governor understands the argument we have made that it’s critical for the operation of government that we get Proposition 103 implemented, and he doesn’t want the Office of Administrative Law to stand in the way of rebates to the people.”
However, Wilson in his statement seemed to suggest also that he was eager to clear the tables for a new court test of the validity of the rebate provisions of Proposition 103.
A key insurance industry lawyer said Monday that a long process is still in store before many Californians get rebate checks, if they ever do.
Leonard Venger said many insurers are likely to appeal Garamendi’s rebate orders via an administrative hearing and then sue in federal and state courts.
Proposition 103, narrowly approved in the 1988 general election, called for a 20% rollback of 1989 premiums on all auto, homeowner and commercial insurance policies. The state Supreme Court later ruled that the rollbacks should be reduced if they prevented insurers from earning a “fair rate of return.”
The rollbacks were delayed so that the insurance commissioner could decide on a standard for a fair rate of return. Protracted hearings and lawsuits have further delayed the rollbacks. If any money is ever repaid to consumers on their 1989 premiums, it will be in the form of rebates that include accrued interest.
Garamendi has said one-time rebates would vary but will average more than $100 per policyholder.
Harvey Rosenfield, author of Proposition 103, said he was pleased with the decision to let the rebate process go forward and that Wilson was pressured by flagging popularity.
“I don’t think Wilson had much choice, frankly,” Rosenfield said. “With his summer tax increases and his veto of the gay-rights bill, I don’t think he wanted to make enemies of the rest of the people of the state.”
Garcia, Wilson’s appointee as director of the Office of Administrative Law, had blocked Garamendi’s effort to issue emergency regulations after saying no real emergency existed.
Garcia also ordered that the insurance commissioner hold more public hearings, despite months of public hearings already held by Democrat Garamendi and his predecessor, Republican Roxani Gillespie. But even if more hearings were held, Garcia said he might rule that Garamendi has no regulatory authority over rebates.
In his decision Monday, Wilson appeared to reject all of Garcia’s positions, although he did so politely and at times indirectly. Garcia could not be reached for comment on the governor’s decision.
The governor’s statement said he believed that the regulations offered by Garamendi “apparently were derived from hearings where public participation was substantial.
“Because of the abundant opportunities for public comment, and the litigation related to this issue, the concerns about meaningful participation and effective judicial review are less compelling than they would be ordinarily,” Wilson’s statement said.
In a six-page formal opinion that accompanied Wilson’s statement, Janice Rogers Brown, the governor’s legal secretary, concluded:
“Insurers and consumers are entitled to the swift determination of the insurers’ rollback liability and to a comprehensive judicial determination of the viability of the initiative’s central provisions, as implemented, without any further unnecessary delay.”
Both her opinion and the governor’s statement indicated that at the topmost levels of the Wilson Administration there was a desire not to further delay implementation or legal appeals of the initiative.
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