Coalition Plans Suit Targeting Quackenbush

A coalition of community groups is planning to sue state Insurance Commissioner Chuck Quackenbush for what it contends is his illegal refusal to enforce antiredlining laws.

In a lawsuit to be filed today in San Francisco County Superior Court, the groups seek to force Quackenbush to implement regulations requiring insurers to provide extensive sales information, including the geographic, racial and ethnic makeup of their customer base.

Quackenbush issued bulletins to insurers last month postponing the deadline for filing the data from March 1, 1996, to March 1, 1997. He hopes in the meantime to amend the regulations by giving companies the option of filing detailed marketing plans for “underserved” neighborhoods instead of supplying the demographic and ZIP Code-indexed sales data.

But the community groups, in a statement announcing their suit, said the postponement suppresses “indisputable evidence of which companies are and are not discriminating against California’s minority, low-income and limited-English-speaking communities.”

For years, community advocates have argued that redlining robs urban neighborhoods of an essential component for growth.

“You can’t even get inventory for a shop unless you have fire insurance to protect it,” said Mark Savage of Public Advocates Inc., a San Francisco-based legal-services group representing the plaintiffs.

The problem was highlighted when merchants whose shops were destroyed in the 1992 Los Angeles riots could not recover their losses. Having been rejected by established insurers, the merchants turned to fly-by-night offshore carriers that were either outright phonies or too undercapitalized to pay claims.

Fernando Cheung, executive director of the Oakland Chinese Community Council, one of the plaintiffs in today’s lawsuit, said he was appalled by Quackenbush’s decision to push back the compliance date. “We believe such a monitoring measure is absolutely necessary and is among the first steps to increase accountability for the insurance industry,” he said in a telephone interview.

Quackenbush believes the data requirements are “unnecessarily burdensome, expensive and of questionable value,” spokesman Richard Wiebe said. Even if the data were turned over, he added, “the Insurance Department does not have the staff or resources to analyze the information or make use of it.”

The insurance industry has opposed the data collection rules since they were imposed in 1994 by Quackenbush’s predecessor, John Garamendi.

“It seemed like a hugely expensive exercise that led to nothing but a mountain of data, not much of which would be reliable,” said Jeffrey J. Fuller, chief counsel for the Assn. of California Insurance Companies, a Sacramento-based trade group.

Many insurers, expecting a reprieve from the March 1 deadline, had stopped compiling the information, Fuller said. “I think a lot of them kind of held off on the assumption that the amending [regulations] would be in effect,” he said.

The community groups intend to argue that Quackenbush lacked the authority to suspend the deadline by fiat. To accomplish that legally, they contend, he must file formal amendments with the state Office of Administrative Law, which he has not done.