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Editorial: California's insurance coverage commissioner faces ethics questions

Politicians are condemned for taking potentially compromising contributions often enough to have developed standard responses — among them, blaming one’s incompetent campaign treasurer. The trouble for state Insurance Commissioner Ricardo Lara, recently caught breaking his promise to forgo donations from the insurance industry, is that he served as his own campaign treasurer.

Another standard defense is to defy one’s critics to discover any official act favoring the contributor in question. Unfortunately for Lara, soon after the questioned contributions were made, he and his department intervened in a pair of legal disputes to the benefit of one of the insurers.

Lara and his subordinates argue that those decisions were necessitated by the law and precedent, not any influence gained through political contributions. But the commissioner’s failure to distance his campaign from the industry has invited scrutiny not only of the recent legal decisions but also of every meeting or speech that might suggest a broader effort to ingratiate himself with the insurers he was elected to regulate.

Steeped in Sacramento politics as a veteran legislator and aide, Lara entered last year’s race for insurance commissioner as a consummate insider with no shortage of support from special interests. He had taken contributions linked to insurers both as a legislator and during the race for the Democratic nomination for commissioner. In keeping with the standard practice of commissioners for nearly two decades, however, Lara subsequently pledged to return industry donations and refuse them going forward.

The custom of eschewing insurance industry support dates to Chuck Quackenbush’s ignominious resignation from the office in 2000. A Republican legislator from Silicon Valley who became the state’s second elected insurance commissioner with substantial support from insurance companies, Quackenbush aborted his second term amid allegations that he had leveraged industry money to benefit himself and his family.

The current commissioner’s difficulties began in earnest last month after the San Diego Union-Tribune reported that despite last year’s pledge, his recently formed reelection campaign had taken more than $50,000 — the bulk of its income to date — from donors with previously undisclosed ties to the insurance industry. Lara later vowed to refund the donations, which he attributed to an “honest mistake,” and hire a treasurer to vet future campaign contributions.

More than $30,000 in donations to Lara’s re-election campaign were linked to Applied Underwriters, a workers’ compensation insurer owned by Warren Buffett’s Berkshire Hathaway. Buffett’s company is planning a sale of the unit that must be approved by the Department of Insurance. In addition, Applied has a significant stake in dozens of disputes with employers it insured, stemming from policies the department deeemed unapproved and therefore unlawful.

In June, two months after the political contributions linked to Applied, Lara stayed his recent approvals of administrative law judges’ rulings in two of those disputes for reconsideration. While the Union-Tribune report led Lara to recuse himself from those cases and all other matters involving the insurer, his staff followed the stays with amended decisions requiring the insured companies to pay Applied under the terms of another policy approved by regulators. That amounted to a break for the insurer in those cases.

Lara and his staff say their initial approval of the rulings overlooked a small but crucial clause and footnote that departed from a precedent established under the previous commissioner, Dave Jones, forcing them to revise the orders. They also maintain that a May meeting between Lara and Applied’s chief executive did not stray into the details of the cases, which would violate state law against such communications outside a proceeding.

The industry donations have also brought scrutiny to the commissioner’s activities beyond the Applied cases, from his support for legislation facilitating pet insurance to his apparent willingness to help insurers make use of data on driver behavior. Lara’s office maintains that the initiatives stand to benefit consumers as much as the industry.

Even if Lara’s official acts don’t justify suspicion in and of themselves, they’re bound to be viewed in the compromising light of the contributions he accepted. In just over half a year in an office whose importance is growing amid wildfire and other risks, the commissioner has engendered a remarkable degree of distrust — and reaffirmed the wisdom of his recent predecessors.

More Information

Chuck Quackenbush, a Republican legislator from Saratoga, became California’s second elected insurance commissioner in 1995 with substantial support from the insurance industry.

He resigned in disgrace in 2000 amid revelations that he had allowed insurers to donate to a pair of foundations rather than pay fines for mishandling claims arising from the Northridge earthquake.

Insurance industry money helped Quackenbush pay for television ads starring himself, a failed state Senate campaign mounted by his wife, a second mortgage, and a football camp attended by his children.

Until Ricardo Lara took office, subsequent insurance commissioners avoided taking campaign contributions from the industry they regulate so as not to invite similar suspicions about their impartiality.

This commentary is from The Chronicle’s editorial board. We invite you to express your views in a letter to the editor. Please submit your letter via our online form: SFChronicle.com/letters.


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