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State Insurance Watchdog Survives Agency Assault

Insurance Watchdog Hounded by Critics

Wall Street Journal
California

A quarter-century ago, as he was contemplating a law practice that focused on suing insurance companies for mishandling claims, freshly minted attorney Ray Bourhis had a moment of doubt: Would there really be enough business to make a living?

His mentor, the colorful trial attorney Marvin Lewis, told Mr. Bourhis not to worry. The late Mr. Lewis – best known for winning a $50,000 judgment for a dance teacher who claimed a cable-car accident turned her into a nymphomaniac – promised there would always be enough unhappy policyholders and recalcitrant insurers to go around.

“He assured me that given the hundreds of millions of dollars at stake for the insurance companies, the problems wouldn’t go away,” Mr. Bourhis says.

And neither would the 56-year-old litigator. Not only did he build a practice suing insurance companies, but since 1991 he has served as their court-appointed over seeing the state Department of Insurance’s handling of complaints related to “unfair claims practices” by insurers, which include underpaying claims and hiring unqualified experts to evaluate them. In this role, Mr. Bourhis reports to the court what the department is- or isn’t – doing.

To the frustration of the insurance industry and its state regulators, last month San Francisco Superior Court Judge John Dearman reaffirmed Mr. Bourhis’s power, denying a motion by the Department of Insurance to discharge the special master.

In legal papers, the department, represented by Deputy Attorney General Julian Standen, had charged that Mr. Bourhis “has abused the appointment” by using it “for publicity” and “to enhance his participation in the political process.”

The department has yet to decide whether to appeal, says its assistance chief counsel, Patricia Staggs. It will, however, comply with the judge’s other order to make available an employee that Mr. Bourhis has sought to depose.
XXX Mr. Bourhis to ratchet up his investigation of the department under Commissioner Chuck Quackenbush, a Republican who was reelected to a second four-year term last month. And, the courtroom wrangling is prompting even more scrutiny of the state agency, which will be the subject of a series of legislative oversight hearings early next year.

Yet even as Mr. Bourhis has come under fire from insurance interests, some consumer advocates say they, too, question his role.

“He’s one of the good guys,” says Harvey Rosenfeld, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica and author of Proposition 103, which rolled back auto-insurance rates. Yet, “quite frankly,” Mr. Rosenfield admits, “I don’t know what he’s done in his role as special master”

For his part, Mr. Bourhis accepts the criticism that he’s been slow in looking into the department’s handling of consumer complaints of unfair practices by insurers. “I want to have a balanced approach, ” he says. Consumer groups “probably want me to be more aggressive.” “But I wanted to give Mr. Quackenbush a chance to enforce the laws,” he said.

Campaigned for RFK

Born in New York City to French immigrants, Mr. Bourhis studied political science and English at Ohio State University. After his 1966 graduation, Mr. Bourhis joined Robert Kennedy’s presidential campaign, working closely with the former New York senator, he says, on the Indiana and Ohio primaries.

After Sen. Kennedy’s assassination in 1968, Mr. Bourhsi carried the liberal torch to Northern California, working with farm families around Watsonville through the domestic peace corps program knows as Vista, or Volunteers in Service to America.

But within a year, Mr. Bourhis shifted his efforts from field work to classwork. He enrolled in Santa Clara University’s law school and then transferred to the University of California-Berkeley.

In 1973, Mr. Bourhis and two classmates launched a campus public-interest group called Cal Advocates. The organization, Mr. Bourhis says, was the precursor to the California Public Interest Research Group, which Ralph Nader founded in 1972 to monitor political campaigns and environmental matters.

Soon, however, a family misfortune led Mr. Bourhis to turn his focus to the world of actuaries and insurance agents. His mother’s health had begun to deteriorate following a heart attack in 1966. Until she died in 1975, he says, his parents struggled with their insurance carrier over treatment for his mother.

“Her medical insurance refused to pay for some of the bills and the specialists she needed to see.” he recalls. “She never got better. My father who lived until last year, said he never forgave the insurance company.” Neither did Mr. Bourhis, who decided to center his law practice on suing insurance companies.

That effort escalated in 1988, when Mr. Bourhis seized on a statement in a dissenting opinion by Justice Stanley Mosk of the California Supreme Court. Justice Mosk had observed that the Department of Insurance had never filed suit against a major insurer to enforce the unfair-claims practices law since its enactment in 1959.

Filed Suit

Mr. Bourhis felt it was time the department did. In 1989, using a legal provision that allows taxpayer suits to compel government action, he sued the department and then-Commissioner Roxani Gillespie, an appointee of Republican Gov. George Deukmejian, (Prior to the adoption of Proposition 103 in 1088 which made the office elective, Insurance commissioners were gubernatorial appointees.)

The suit, filed in San Francisco Superior Court in 1989, charged that Ms. Gillespie had “systematically” failed to enforce California’s Insurance law and that department routinely “destroys evidence.”

(At the time, Ms. Gillespie, now a San Francisco attorney who represents insurance companies, denied the allegations.)

The court granted Mr. Bourhis’ request to compel Ms. Gillespie to enforce the law. The court also ordered the department to retain complain files for six months as well as make them available for Mr. Bourhis to review. The department appealed the ruling.

In 1996, Mr. Bourhis ran in the first election for insurance commissioner, losing in the Democratic primary to state Sen. John Garamendi, who went on to win the general election. Mr. Bourhis now says he ran simply as “a protest candidate” against the Gillespie administration.

After Mr. Garamendi took office in 1991, the department withdrew its appeal of the court decision to Mr. Bourhis’s lawsuit. It also is agreed to allow the court to appoint Mr. Bourhis as special master.

Worked on Law

In his monitor role, Mr. Bourhis helped Mr. Garamendi fine-tune provisions in the unfair-claims practices law. It’s these actions, among others, that rile Mr. Bourhis’s critics. They say he’s an activist who can’t be an objective agent of the court.

Eugene Majeski, a lawyer in Redwood City who represents insurers – and often crosses swords with Mr. Bourhis 00 calls him a “competent adversary.”

Yet, Mr. Bourhis “is averse to insurance companies and he’s always averse to the Department of Insurance, ” Mr. Majeski asserts. “That makes him a problematic referee.”

Mr. Bourhis maintains that he simply wants to see “the law being enforced and fairly.” Moreover he says, that much of the time insurance companies behave responsibly. “They almost always pay out small claims, ” he says, adding that he personally has never had trouble with his insurers.

Rather, it’s those with big claims $50,000 and up – that are most likely to encounter problems, he says.

Needless Job

But as far as the department of Insurance is concerned, it’s Mr. Bourhis who has the problem. For nearly a year, the state officials have sought to remove Mr. Bourhis from his special master role, citing the department’s improved handling of consumer complaints.

Under Mr. Quackenbush’s administration, “there have been more enforcement actions and more fines levied against insurance companies for consumer abuse than under any other commissioner, “says Dana Spurrier, a department spokeswoman. She points to fines totaling nearly $36.9 million from 1995 to date under Quackenbush, compared with just $5.6 million in fines under Garamendi.

Yet, in an interim report submitted to court in June, Mr. Bourhis says that from 1995 to 1997, while more than 1.2 phone calls were placed to the department’s complaint hot line, only about 43,700 formal investigations were launched . The department “is simply standing on the sidelines” and “taking credit for recovering funds for consumers that are more likely far less than the consumer was actually entitled to,” he concluded in the report.

The department responds by pointing out another measure of public satisfaction, Mr. Quackenbush’s overwhelming victory in last month’s election.

Still the state Senate Committee on insurance is planning to hold a hearing next year on the department’s handling of consumer complaints.

“There’s a lot of questions about what the department is doing, ” in the wake of a failed effort ‘to eliminate the special sector, ” says Beverly Hunter, the committee principal consultant. “Legislators continue to hear from frustrated consumers.”

Mr. Bourhis says he does, too, vow to accelerate his efforts next month, when he resumes deposing department staff. What’s needed, he says, is “public poll and financial disincentives that significantly counter the financial advantages to insurance companies to cheat people.”