Garamendi says insurers used extortion to block new automobile regulations

State Insurance Commissioner John Garamendi accused automobile insurers of
“coercion, extortion and blackmail” for launching a $2.4 million campaign
attacking his proposed regulations that would cut the cost of some drivers’
coverage in crowded urban areas. He asked the FBI, the U.S. attorney and
state Attorney General Bill Lockyer to investigate his allegations.

Garamendi, a Democratic candidate for lieutenant governor in the June 6
primary, said he was told that if he backed off pushing the regulation, he
would be spared an attack by insurers as Election Day neared.

He was informed that “if I abandoned my political responsibilities and
delayed implementing the will of the people, I would not be hit by a $2
million negative advertising campaign,” Garamendi said Monday. “I firmly
believe that this amounts to a serious attempt to blackmail me in my role
[as insurance commissioner].

“I took it [the message] very much as a threat, an out-and-out threat. And
then it was repeated the next day,” Garamendi said. The state attorney
general is reviewing Garamendi’s allegations to decide whether an
investigation is warranted, said Lockyer spokesman Tom Dresslar.

Insurers and their representatives dismissed Garamendi’s allegations, saying
the campaign represents an effort to educate consumers about auto-insurance
rates. Californians to Stop Unfair Rate Increases, the coalition financed by
insurers that includes an array of local-government officials, urges people
on its Web site to write in to “tell Insurance Commissioner John Garamendi
to STOP his department’s unfair regulation that would raise our rates.”

Insurers contend Garamendi’s proposed regulations downplay the importance of
a driver’s address and thus prevent insurers from accurately determining
risk–the key element in pricing coverage. They say that requiring insurers
to cut costs in some counties, such as Los Angeles, Orange and San Diego,
would force carriers to raise premiums elsewhere. Insurers estimate that six
out of 10 policyholders would experience price spikes of up to 30 percent
under Garamendi’s proposed regulation.

The commissioner said the regulations are needed to meet the requirements of
Proposition 103, the voter-approved ballot initiative that requires
automobile insurance to be based mainly on a driver’s safety record, miles
driven and level of experience.

Garamendi said veteran political consultant Darry Sragow telephoned him two
weeks ago to alert him that automobile insurers planned to move forward with
their campaign if Garamendi proceeded with the regulations. Sragow, who
learned of the insurers’ plans from an insurance executive, said he had
contacted Garamendi at the executive’s request.

“I thought, ‘Well, if there’s going to be a messenger, it might as well be
me,'” Sragow said, adding that he had been told that “they [insurers]
planned to move ahead unless John was willing to let this issue go and leave
the issue to be dealt with by his successor. That’s what they were looking

“I played a very specific role. I was asked to make a call.

Want to see more stories like this? Sign up for The Roundup, the free daily newsletter about California politics from the editors of Capitol Weekly. Stay up to date on the news you need to know.

Sign up below, then look for a confirmation email in your inbox.


Support for Capitol Weekly is Provided by: