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| | Will Old Insurance Settlements Hold Up? By John Millrany - August 22, 2001Five beefy insurance businesses—Allstate, Farmers, Firemen’s, State Farm and 21st Century—face potentially weighty Department of Insurance scrutiny after filing court papers relating to settlement deals cut with former DOI Commissioner Chuck Quackenbush.
Millions of dollars in settlement agreements were spun, and the insurers filed the papers in an effort to prove the settlements are legally binding, even as the state attorney general maintained that many settlements fell in the low-ball category.
According to AP, if the insurers lose their contention, they will face a fresh investigation into allegations that they have short changed hundreds, possibly thousands, of policyholders in paying damage claims linked to the 1994 Northridge Earthquake.
"If there is a full recission, we will get the (DOI) commission to take a look at each one of these companies and make an evaluation of their conduct," said DOI boss Harry Low.
He said subsequent penalties could range form "zero into many, many zeros with a number in front of it.
AP pointed out that the insurers are insisting that the funds should stay intact because they were created "in a good faith agreement with Quackenbush," who eventually resigned in an accusation-filled scandal.
"We reached what we felt was a fair settlement," AP quoted State Farm counsel Ken Cooley. "I guess we just don’t see that, in any of this process, there is a reason why it makes sense to reopen things."
In 1999, five years after America’s most expensive earthquake, the insurers settled with Quackenbush to avoid paying as much as $3 billion in penalties involving resolution of claims. The deal called for the companies to create and finance nonprofit funds to benefit the public, including the California Assistance and Research Fund, now the target of a state lawsuit.
According to consumer advocate Harvey Rosenfeld, "The settlements were completely improper. They do not serve any public service."
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