Insurers seek relief from refiling of Northridge claims

"It's such an outlandish claim that the entire constitutional protection for contracts is jeopardized," said Doug Heller, a spokesman for the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

"This legislation is very narrowly defined to protect a small but seriously injured group of earthquake victims and does not seek to alter contracts," Heller said.

The coalition of insurance companies filed their petition directly with the Supreme Court instead of going first to a lower court. Insurers said the unusual move was necessary to expedite action before the law takes effect in less than six weeks.

Insurers said the law's language was ambiguous and potentially could allow the resubmission of most of the 618,000 claims filed in connection with Northridge quake.

Insurers also contended the law, authored by Senate Leader John Burton, D-San Francisco, was a disguised attempt to pave the way for class-action lawsuits that could result in huge awards from insurers.

"This unconstitutional abuse of government power poses a threat to the stability of every commercial enterprise in California, for commerce cannot thrive without the judiciary's full assurance that a contract means what it says," the petition said.

It was filed by Century National Insurance Co. and three major insurance industry lobbying groups - the Association of California Insurance Companies, the Personal Insurance Federation of California and the National Association of Independent Insurers.

"The general rule of constitutional law is that the Legislature cannot impact contractual rights. That's the law," said Sam Sorich, an NAII executive and spokesman for the insurance coalition that filed the petition. "These rights are settled and the Legislature cannot come in and violate settled rights," he said.

He said the insurers hoped to resolve the issue quickly in order to avoid a flood of possible lawsuits that could clog the Superior Court in Los Angeles if the law takes effect.

The Northridge earthquake stuck in January 1994, killing dozens of people and causing about $15.3 billion in insured losses in the Los Angeles area.

The handling of Northridge claims - more than 99 percent of which have been settled - captured attention this year during legislative hearings into Quackenbush's conduct in office.

Market conduct exams performed by the Department of Insurance suggested that insurers committed more than 2,500 claims-handling violations relating to the Northridge quake. The violations carried potential fines of more than $3 billion. Insurers denied they mishandled claims.

The Burton bill was inspired by those allegations of claims mishandling. It allows certain property owners who suffered quake damage and felt they were shortchanged by their insurers to file new claims during 2001.

The measure provides those quake victims with an exemption from current law, which requires claims to be filed within a year after the quake. Insurers say that one-year filing period is a standard deadline in their contracts.

People who settled their original claims with the help of a lawyer or through a court order would not be able to file new claims.

Quackenbush came under fire after he set up a nonprofit foundation called the California Research and Assistance Fund, and persuaded several insurers to donate about $12 million to it in lieu of paying far higher amounts for alleged claims-handling violations.