Insurance Suits Hit Turf Snag

But first, he has to settle a turf battle with state Atty. Gen. Bill Lockyer.

The two elected officeholders, potential competitors in the 2006 Democratic gubernatorial primary, have been dickering over the best legal and regulatory strategy to halt the alleged payment of kickbacks by insurance companies to brokers who steer business their way.

The issue gained national prominence last week after New York Atty. Gen. Eliot Spitzer filed a lawsuit against Marsh & McLennan Cos., the world's largest insurance broker, alleging that the firm conspired with insurers to inflate bids at the expense of clients. Spitzer indicated that other brokers and insurers were in his sights.

Garamendi, who said he had been working with Spitzer since February, said he wanted to take legal action under California's Unfair Competition Law against brokers and insurance companies, which he has declined to identify. Lawsuits, if successful, could force defendants to disgorge illegal profits.

"We intended to file [a lawsuit] last week, but we hit a little speed bump along the way," Garamendi said.

That speed bump, he said, was Lockyer.

The commissioner said Lockyer's staff had made it clear to Garamendi that only the attorney general could take an action under the Unfair Competition Law on behalf of the state of California.

So far, Lockyer hasn't indicated whether he would pursue the case on those grounds, and Garamendi conceded that he needed the attorney general to go to court.

"It's his turf," Garamendi said.

Lockyer's office, citing its attorney-client relationship with Garamendi, declined to discuss the possibility of taking legal action. However, Lockyer spokesman Tom Dresslar said the attorney general's office was taking a "hard look" at broker practices.

"We have formed an interdisciplinary team of lawyers to look at the problem of secret payments and bid rigging in the insurance industry," Dresslar said.

Those are the same practices that Garamendi is looking at. Although both he and Dresslar said that the two offices were in communication with each other, the timeline for any potential legal action remained foggy.