Calif. Officials Seek Dismissal of Insurance Settlements

On Nov. 20, Attorney General Bill Lockyer, joined by Insurance Commissioner Harry Low, asked a court to void controversial earthquake settlements that allowed insurance companies to donate to foundations rather than face fines for mishandling claims stemming from the 1994 Northridge Earthquake. The California officials filed an amended complaint in Sacramento Superior County Court seeking dismissal of these settlements.

The complaint contends that Quackenbush lacked the authority to arrange deals that allowed State Farm, 21st Century (formerly 20th Century), Allstate Corp. and Farmers Insurance to avoid paying roughly $3.3 billion in fines from alleged mishandled claims stemming from the 1994 Northridge Earthquake. Instead, insurers donated approximately $12 million to the nonprofit California Research and Assistance Foundation. The donations were used to make contributions to certain charities and to pay for television spots that featured the commissioner.

The complaint also seeks damages from a number of the controversial nonprofit’s board members, including former Deputy Insurance Commissioner George Grays, for allegedly using the charity’s assets for their own personal gain. According to Lockyer, foundation moneys were misused by Grays, who controlled the distribution of California Research and Assistance Fund, and Ron Weekley, who sat on its board of directors.

State Farm spokesman William Sirola said he was surprised at the attempt to void the settlements because his firm had been meeting regularly with California officials to work out a way to resolve the issue.

After the settlements came under fire in a series of legislative hearings, Chuck Quackenbush, the state’s second elected insurance commissioner, stepped down from his post, effective July 10, 2000. By resigning, the former commissioner avoided almost certain impeachment.