SACRAMENTO — Last week a big framed photo of a smiling Insurance Commissioner Chuck Quackenbush dominated the Department of Insurance headquarters waiting room. On Monday there hung a mauve-and-blue watercolor print too small to hide one of the nail holes left in the wall.
Familiar faces were missing, too, a few steps away in the wood-paneled conference room where the department's chiefs huddle every Monday morning. Where Quackenbush once presided, law professor Clark Kelso sat in his first official day as California's acting insurance commissioner. Absent were seven top administrators who, like Quackenbush, resigned this week in the face of questions about how the Department of Insurance used millions of dollars collected from insurance companies in lieu of fines.
Under pressure from state Atty. Gen. Bill Lockyer and as one of his last official acts, Quackenbush on Thursday chose Kelso to take over the 1,200-employee agency charged with regulating insurance companies in California.
On Monday Quackenbush, a Republican former state Assemblyman who was elected insurance commissioner in November 1998, was reportedly just starting to ponder a new career after 14 years in public office.
For the Record
Los Angeles Times Thursday July 13, 2000 Home Edition Part A Part A Page 3 Metro Desk 1 inches; 29 words Type of Material: Correction
Quackenbush election--An article in Tuesday's editions of The Times misstated the year Chuck Quackenbush was elected state insurance commissioner. He was first elected in 1994 and was reelected in 1998.
"He hasn't really given that a lot of thought," said Donald Heller, the Sacramento attorney who advised Quackenbush through weeks of questioning by lawmakers and who defends him in an ongoing criminal investigation by the attorney general. "He's going to do that in the near future.
"Despite what other people have said, he's a guy with a lot to offer," Heller said. "I think he'd make a pretty good teacher."
Quackenbush himself could not be reached for comment at his home several miles north of Sacramento.
By Monday Kelso, 40, had moved from his post at the University of the Pacific's McGeorge School of Law in Sacramento to Quackenbush's old suite, 17 stories high and seven blocks from the Capitol.
The magnitude of his new trustee role became clear to Kelso early: A San Francisco judge put the Insurance Department on notice that it must review--and possibly undo--the settlements Quackenbush struck with insurance companies accused of treating homeowners unfairly after the 1994 Northridge earthquake.
Those settlements led to Quackenbush's downfall. He and top administrators allowed companies to pay millions of dollars to nonprofit foundations created by the department rather than pay even steeper fines, as recommended by Insurance Department staff. Some of that foundation money paid for television ads featuring Quackenbush, for political polling and for donations to charities with ties to Quackenbush. None of it was spent to help earthquake victims.
On Monday San Francisco lawyer Ray Bourhis, who has spent 10 years as a special master monitoring the department's handling of consumer complaints, urged the court to dissolve the settlements, calling them a "fraud on the people of California."
Bourhis said each of the settlement agreements absolved the companies of wrongdoing after the Northridge earthquake, even though confidential reviews by the Insurance Department had found numerous examples of unfair claims practices.
"At the same time they were entering into these agreements, they were well aware from their own reports that there were in excess of 2,700 violations of the insurance code," he said.
The court should now throw out the agreements and order the department to reopen its investigations of Northridge claims handling, he said.
But Superior Court Judge John Dearman said it would be unfair for him to act without giving Kelso an opportunity to address the issue.
"I do feel," he said, "some time should be given to him to rectify some wrongs."
Dearman said he will assess the department's progress at another hearing Aug. 28.
With no name yet slipped into the gold nameplate on his door, Kelso said he hoped that Gov. Gray Davis would quickly pick a longer-term insurance commissioner, in time to be approved by the Legislature when it reconvenes in August. Within weeks or months, Davis is expected to name someone to serve as insurance commissioner until voters endorse a candidate in November 2002.
"I want to go back to teaching at the University of Pacific," said Kelso. "That's what I've been doing for 13 years."
Still, he said he feels confident about his ability to shift from trying to teach government leaders how to make good decisions--something he does as a frequent consultant to California lawmakers, judges and the governor's office--to crafting policy himself.
"I wasn't plucked out of mid-air for this," said Kelso. While he hasn't defended or fought insurance companies as an attorney, he said, he has been "in and around" all sorts of insurance issues as a scholar.
Kelso said his touchstones are the nation's founding fathers. On his desk rest a bust of George Washington, a biography of Thomas Jefferson and a handsomely bound book titled "Unfair Trade Practices Litigation."
"I'm frankly feeling comfortable," Kelso said. He praised the experience of top department staff handling rate regulation, fraud investigations and enforcement. He described workers as upbeat and relieved to move beyond months of headlines, scandal and legislative hearings.
His first goal, Kelso said, is to prioritize the department's issues. But he offered few details, saying, "I have to be much more careful about what I talk about now than I'm used to as a law professor."
Times staff writer Virginia Ellis contributed to this story.