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Posted by tonyb on November 22, 2000 at 05:57:34:


By Michael Kahn

SAN FRANCISCO, Nov 20 (Reuters) - Two top California officials asked a court on Monday to void
controversial earthquake settlements with four major insurers and their affiliates in a move that could
expose the firms to fines or penalties.

Attorney General Bill Lockyer and Insurance Commissioner Harry Low filed an amended complaint in
Sacramento Superior County Court seeking to void the settlements at the center of a scandal that led former
insurance chief Chuck Quackenbush to resign last June.

The complaint contends that Quackenbush lacked the authority to arrange deals that allowed State Farm,
21st Century, formerly 20th Century, Allstate Corp. and Farmers Insurance to avoid paying some $3.3 billion
in fines from alleged mishandled claims stemming from the 1994 Northridge Earthquake.

Instead, insurers donated some $12 million to the nonprofit California Research and Assistance
Foundation, described as a political slush fund that critics say ran advertisements that boosted
Quackenbush's career.

``This opens the firms up to any kind of enforcement or regulatory review by the Department of Insurance if
the settlements are voided,'' said Sandra Michioku, a spokeswoman for the Attorney General. ``We are also
pursuing the dissolution of the nonprofit corporation.''

Representatives of 21st Century did not return calls seeking comment but Allstate issued a statement
saying it considered its deal with the Department of Insurance binding and noted the firm had paid $2
million toward the foundation. ``We believe strongly that the settlement agreement entered into between
Allstate and the California Department of Insurance is a valid and binding contract and Allstate has complied
fully with the terms and conditions of that contract,'' the statement said. ``It's important to know that Allstate
did not establish the fund and did not control its expenditures.''

State Farm spokesman William Sirola said he was surprised at the attempt to void the settlements because
his firm had been meeting regularly with California officials to work out a way to resolve the issue.

Quackenbush has resolutely denied any wrongdoing in his regulation of insurance companies. But he
nevertheless stepped down on June 28 after months of revelations about how his office struck questionable
deals with insurance and title firms. By leaving his post, the two-term Republican avoided almost certain
impeachment in one of the worst political scandals to hit California in decades.

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