Calif. Commissioner Quackenbush Resigns; Attorney General to Continue

June 29, 2000

California Insurance Commissioner Chuck Quackenbush resigned Wednesday after months of accusations that he used millions of dollars from an earthquake fund established by his office to further his political career. He was to testify today before a legislative committee on those very accusations.

The resignation, effective July 10, came after a night of negotiations with state legislators and attorneys in which Quackenbush made an effort to limit any civil or criminal liability. By resigning, Quackenbush averts any possibility of impeachment.

However, Attorney General Bill Lockyer said his office did not offer Quackenbush any deals and would continue its probe into allegations that claims following the 1994 Northridge earthquake were not settled appropriately by insurers. Instead of being fined, insurers were allegedly forced to donate nominal amounts to an earthquake fund that was to provide earthquake education and research. How those funds were used has also been a part of the investigation.

“If crimes have been committed by anyone associated with these actions, my office will take action to see to it that they are prosecuted,” Lockyer said in a statement. “We will seek civil penalties and restitution where appropriate.”

Quackenbush was one of only two Republicans elected to statewide office in California. Governor Gray Davis, a Democrat, will appoint a replacement for Quackenbush.

“I will name someone of unquestioned integrity, with the ability and experience to restore credibility to this important office,” Gray said in a statement.

According to Jerry O’Kane, chief executive officer of IBA West, names mentioned most prominently thus far include former Assemblyman Richard Katz, former State Senator Tom Umberg, Congressman Gary Condit (D-Calif.), State Sen. Pat Johnston (D-Stockton), and State Senator Jackie Speier (D-San Francisco/San Mateo).

O’Kane says that also under discussion “is the possibility that the governor would immediately replace Chief Deputy Michael Kelley and leave the position of Insurance Commissioner unfilled for some time.”

“The name mentioned most often should this occur is Cliff Allenby, a well respected and experienced regulator who has served in other such posts on an interim basis for other governors faced with a key vacancy,” O’Kane said.

Immediately following the news of Quackenbush’s resignation, CARe, Community Assisting Recovery, made a call for insurance claims of Northridge earthquake victims to be readdressed.

“Now that the chief officer of the Department of Insurance has resigned to avoid possible impeachment, the focus of property owners and the state Legislature should be on undoing the damage caused by the lack of enforcement of the insurance Fair Claims Practices Act by the Commissioner,” said George Kehrer, executive director of CARe.

“Mr. Quackenbush did not mishandle and underpay earthquake claims, according to the Department of Insurance market conduct exams, the insurance companies did,” Kehrer said. “Hopefully a new commissioner will protect the interests of the consumer rather than the insurance industry.”

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