Commissioner Claims Shakedown Over Auto Insurance Regs
By Steve Lawrence, Associated Press Writer - May 9, 2006SACRAMENTO (AP) _ State Insurance Commissioner John Garamendi accused a group of insurance companies Monday of trying to blackmail him by threatening to run a $2 million ad campaign against his pending auto insurance regulations in the midst of his campaign for lieutenant governor.
Garamendi said a woman who represented either the insurance industry or an insurance company contacted him through an intermediary and offered to drop the ads if Garamendi abandoned the regulations, which would limit use of ZIP codes in setting auto insurance pricing.
"There was a threat made to me to back off or else," he said in an interview. "A $2 million negative campaign would be released against me. That is blackmail. That is extortion, and may be very well an attempt to bribe me."
He said he rejected the offer and planned to file a formal request Tuesday asking the FBI, the U.S. attorney's office and the state attorney general to investigate his allegations.
A group called Californians to Stop Unfair Rate Increases announced Monday that five insurance companies, Farmers, 21st Century, State Farm, Safeco and Allstate, were putting up funding for the ad campaign.
But a spokesman for the industry-funded group, Rick Claussen, denied that there had been any attempt to blackmail Garamendi.
"It's unfortunate that Commissioner Garamendi is distracting from the real issues of this effort, which is to educate Californians about impending, unfair auto insurance rate increases, by making baseless and inflammatory accusations that are completely untrue," Claussen said in a statement.
Claussen's group released the text of a planned mailer and script from a television advertisement. Spokeswoman Kathy Fairbanks said they highlight the issue while avoiding politics or personal attacks on Garamendi.
However, the mailer mentions Garamendi by name several times and the television ad asks viewers to "tell Insurance Commissioner John Garamendi to drop this unfair plan now."
The television ads will begin running next week in 17 largely rural counties, Fairbanks said. The fliers will go out shortly after that.
Opponents contend the regulations will mean higher auto insurance rates for drivers in rural and suburban areas with relatively few accidents and auto thefts and rate cuts for drivers in major urban areas.
Garamendi disputes that argument. He said the proposed rules will carry out voters' intent when they approved Proposition 103, a 1988 measure that slashed auto insurance rates and mandated changes in how rates are calculated.
"It brings fairness to the pricing of auto insurance by reducing the impact of ZIP codes and increasing the impact of the good or bad driver," he said. "It's not good news for reckless drivers."
The proposed regulations would allow auto insurers to use ZIP codes in setting their rates, "but they cannot be more important than the three mandatory factors: driving experience, miles driving and driving record," Garamendi added.
He said the insurers oppose the regulations because "they are unwilling to change and adapt to the laws. They have for decades used ZIP codes as predominant in pricing auto insurance ... and they don't want to change their marketing practices and their computer systems."
Garamendi said the offer to drop the ad campaign came through Darry Sragow, a Los Angeles attorney and former political consultant who ran Garamendi's unsuccessful campaign for governor in 1994 and advised him on his campaign for commissioner in 2002.
Sragow said he was contacted by "someone who works for one of the large insurance companies" in mid-April. He was asked to tell Garamendi that a coalition would put together the ad campaign unless he put off consideration of the regulations until his successor takes office next year.
Garamendi is running in the June 6 primary election against state Sens. Liz Figueroa, D-Sunol, and Jackie Speier, D-Hillsborough, for the Democratic nomination for lieutenant governor.
Sragow wouldn't say who contacted him other than to say it was "somebody I have known professionally."
He said Garamendi told him "hell no, no way, it's a nonstarter," and he passed on that response to the person who contacted him.
In a statement posted to the Department of Insurance Web site, Garamendi said State Farm's regional vice president, Greg Jones, told Garamendi's chief deputy that he was aware of Sragow's call on April 25, the day after it was made.
A State Farm spokeswoman said the company and Jones were referring calls to Fairbanks, who denied there had been an attempt to blackmail the commissioner.
Garamendi said he waited until Monday to make his blackmail claim because he didn't know until last Friday that a campaign group had been set up pay for the ads.
Tom Dresslar, a spokesman for the state attorney general's office, said once Garamendi files his complaint "we will undertake a serious, thorough review to determine whether any laws have been violated."
Cathy Viray, an FBI spokeswoman in Los Angeles, said she hadn't seen Garamendi's complaint and couldn't comment.
The Department of Insurance is accepting public comments on the proposed regulations until May 17. It will submit the regulations next month to the Office of Administrative Law, which will rule on whether they carry out the intent of the law. | 
__May11th2017.gif)
.gif)