Angered by a decision affirming territorial insurance rating, Baltimore City Council President Mary Pat Clarke said her consumer group will mount a court challenge to the decision by Insurance Commissioner John A. Donaho.
"We will see the Insurance Division in court," Clarke said.
At a press conference yesterday, she also said she will be asking Gov. William Donald Schaefer to fire Donaho and to create a new state position for an advocate to represent consumers before the Insurance Division. "We have no one on the side of the people in the commission," Clarke said.
After nearly a year of hearings and study, Donaho ruled that territorial rating, the practice that allows insurance companies to base rates on where a driver lives, is legal and has a valid foundation.
Territorial rating has been a hot issue because of the disparity in rates between Baltimore and other parts of the state.
For instance, State Farm Fire & Casualty Co. charges a 20-year-old single man in Baltimore $2,345 annually while the same man pays only $904 a year if he lives on the Eastern Shore, according to a rate guide published by the state.
State Sen. John A. Pica Jr. also called for Donaho to be fired. "We can no longer tolerate an insurance commissioner's office which totally ignores the legitimate plea of the citizens of Baltimore," Pica wrote in a letter to Schaefer.
Donaho, who has been in the position since May 19, 1989, said it was up to the governor as to whether he will continue as commissioner. "I intend to do it [the job] without fear or favor," he said.
Governor Schaefer is aware of the requests to fire Donaho and will be getting more information about the issue, according to Louise L. Hayman, a spokeswoman in the governor's office. "He may have something to say on it later," she said.
As head of the Baltimore Fair Auto Insurance Rates, Clarke has been fighting territorial rating for more than a year. "I don't think we got a fair hearing and he [Donaho] has wasted a year of Baltimore City's time," she said.
Donaho made his decision after six public hearings around the state; an actuarial review of insurance rates by Tillinghast, an Arlington, Va., consulting firm; and confirmation from the state attorney general's office of past insurance opinions. The first public hearings were held last January.
Besides approving territorial rating, Donaho also ordered all insurance companies to submit plans on how they intend to make their policies available to all Marylanders. That was done because of consumer complaints that some insurance companies do not offer coverage in certain areas.
The commissioner said territorial rating was a reasonable system for assigning premiums, noting that the frequency of claims in Baltimore is 47 for every 1,000 vehicles covered compared with 14.28 for every 1,000 vehicles for rural areas.