By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
One staff member the insurance industry wanted Bomer to can more than Keller was Birny Birnbaum, the department's chief economist and associate commissioner for policy and research. In a previous incarnation, Birnbaum had worked as a consumer advocate who relentlessly tried to prove that insurers discriminate against minorities. Insurers boil at any suggestion that the industry redlines.
Bomer kept Birnbaum on staff.
"Elton Bomer is someone I regard as a true leader," Birnbaum says today. "A lot of commissioners would have backed off of making decisions, afraid of bad press or of offending one group or another. Elton Bomer didn't shy away from anything."
Birnbaum left the agency halfway through Bomer's tenure to work as a consulting economist and actuary to different consumer groups. One of his clients is the Center for Economic Justice, founded by the only Insurance Department executive-level employee to resign during the Bomer transition. D.J. Powers, who was general counsel and chief clerk, figured he needed to jump ship after infuriating the incoming Bush administration by writing controversial rules on redlining that the lame-duck insurance commissioner adopted weeks before Bomer took over.
Powers went on to rankle Bomer for four years as an outspoken advocate for insurance consumers. His criticism of Bomer now, however, is less strident. He says that Bomer tried to do the right things, but that he just went about them the wrong way. For example, Bomer tried to make insurance more available to low-income Texans, but Powers argues that his policies to that end failed.
Powers and Bomer locked horns in 1996 over a settlement in a class action against Allstate and Farmers Insurance Group of Companies. The companies were accused of overcharging for their auto insurance because of the way they calculated premiums. Bomer fumed that the lead attorney in the so-called "double rounding" case, John Cracken of Dallas, was to receive up to $10 million in the settlement while individual consumers were pocketing $5.57 refunds. Powers had assisted Cracken in the case.
With that distaste still fresh, Bomer all but scuttled a proposed class action against several rental-car companies accused of illegally selling liability insurance. Under Bomer's direction, the Texas Department of Insurance entered into an agreement in the summer of 1997 in which five of the companies would refund customers. The agreement was announced days before lawyers were to ask a judge for class certification in their lawsuit. The judge never granted it, effectively killing the suit, and Houston attorney Larry Veselka holds Bomer responsible.
Veselka says he shared his research and opened his files with the Insurance Department only to find out later that Bomer was not interested in anything resembling cooperation. Veselka says he had no problem with the Insurance Department going after refunds, but accuses Bomer of cutting a deal that allowed the companies to undercut the lawsuit.
"Bomer said to us, 'I want to make something perfectly clear: I don't like class actions, and I don't like class-action lawyers,'" Veselka says. "We were the initiating and motivating factors for the companies to deal with the Insurance Department in the first place. And then he allowed the companies to structure the deal in a way that led to our lawsuit being pulled out from under us."
Veselka says the law firms that worked on the class action spent more than $1 million in legal time on the case and have nothing to show for it. Bomer sheds no tears, saying he was trying to avoid a repeat of the "double rounding" case in which lawyers got rich but consumers did not.
"What you're hearing is just bellyaching by the trial lawyer involved," he says. "In those kinds of lawsuits, I don't think the lawyers are thinking about the best interests of the consumers. They're only worried about what they'll get paid."
As insurance commissioner, Bomer did not reserve his ire exclusively for trial lawyers. In 1998, a chorus of consumer advocates complained that insurers' auto rates failed to reflect massive profits the industry was enjoying--mostly from changes in tort laws that reduced the cost of liability claims. To the pleasant surprise of the consumer advocates, Bomer ordered his staff to examine the rates of the 300-plus insurers to see whether consumers were being fleeced. It was a momentous move considering that in Texas, individual insurers have great flexibility in setting their rates as long as they fall within a specified wide range. Once Bomer began his review, companies began sweating.
He threatened some of the state's largest companies that unless they lowered rates, he would challenge them before a panel of administrative law judges--an embarrassing and costly scenario for insurers.
"The various insurance companies did not want to put themselves in a situation where someone else was determining their rates," says John Hageman, Texas executive director for Farmers, which dropped its rates 3.9 percent to get Bomer off its back. "Several carriers, including Farmers, capitulated. We had our own reasons for capitulating, but I can definitely say that the forcefulness of Bomer caused it to happen. Someone of a lesser personality could not have gotten it done."
As Mary Keller puts it, nothing about Bomer's personality is mellow.
"He's abrupt, and there's a great intensity to him that can be terrifying to those who deal with him," she says. "Yet he has this huge tender streak."