Panel Kills Insurance Agency Budget

SACRAMENTO — In a display of political gamesmanship, a Senate budget committee voted Wednesday to put state Insurance Commissioner Chuck Quackenbush’s department out of business because he is appearing in television commercials paid for by the Prudential Insurance Co.

The campaign-style, 30-second commercials, which are scheduled to end Friday, have Quackenbush, a Republican, encouraging Prudential policyholders in California to apply for cash refunds from a $15-million settlement against Prudential that his agency helped negotiate.

But Sen. Steve Peace of El Cajon, the bright and volatile Democrat who is the chairman of the budget-writing subcommittee, charged that Quackenbush is appearing in the ads to enhance himself politically.

He claimed that Quackenbush is trying to get around Proposition 208, the new law that imposes restrictions on nonelection year campaigning and fund-raising.

Peace, joined by fellow Democratic Sen. Richard G. Polanco of Los Angeles, voted to eliminate the department’s $112.3-million proposed budget for the fiscal year that starts July 1. Republican Sen. Rob Hurtt of Garden Grove voted to support Quackenbush.

Peace later conceded that the decision would be reversed in final budget negotiations, but said the vote was intended to get Quackenbush’s attention.

Aides to Quackenbush, who was on vacation, denied that the commissioner acted illegally by appearing in the spots or that the ads were election-related. They voiced confidence that the budget would be restored.

“When he finds out they are not illegal, I’d assume [Peace] will apologize to the commissioner,” said Ken Gibson, the chief deputy director of insurance.

“That’s what commissioners do. They communicate with policyholders to make sure they know their rights,” Gibson told reporters.

Peace accused Quackenbush, who is expected to seek reelection next year, of using the ads “in the most blatantly obvious political way to enhance [his] name identification and exposure and to associate himself with the settlement refund.”

In dispute is a series of television spots that began May 7 in which Quackenbush appeals to Prudential customers who believe that they may have been cheated to apply for cash refunds or other forms of relief.

About 750,000 Prudential customers in California may be eligible to file claims. Quackenbush aides said the television spots merely reinforce earlier mailings to policyholders. So far, nearly 75,000 people have responded, they said.

Prudential had faced a massive class-action suit filed by authorities in every state. Earlier this year, the litigants agreed to a settlement of about $65 million. California’s share was $15 million, the biggest of any state.

The Quackenbush commercial, whose style is typical of campaign spots seeking to boost name familiarity, is a straightforward appeal to policyholders.

It includes a toll-free telephone number for more information and a printed line that says the spot is paid for by Prudential as part of the settlement.

But Peace charged that Quackenbush’s appearance was a violation of campaign reform laws intended to ensure that candidates--especially incumbents--receive no political benefits during the “freeze” periods of nonelection years.

Peace said that in his own case, attorneys advised him not to list himself as a member of a dinner committee that was hosting a fund-raiser for a well-known charity for crippled children.

To have done so “could be construed as . . . potentially illegal,” he said. “If that’s illegal, you tell me how it can possibly be legal for the insurance commissioner to get Prudential to pay for 30-second television spots in which the commissioner is on the air.”

Gibson, Quackenbush’s chief assistant, said Quackenbush was assured by a private attorney that appearing in the ad was legal. Gibson said, however, that the settlement did not require Prudential to be identified as the sponsor of the ad.

Gibson noted that Prudential obtained a federal court order blocking an earlier version of the advertisement as “defamatory.” The commercials now being aired are a watered-down version approved by Prudential, he said.