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And the Winner Isn't ...

A company sues after a lobbying blitz at the legislature fails to net it a state contract.

A controversial plan to hire a private company to nag Colorado motorists without car insurance took an unexpected turn earlier this year: It landed in court when the Utah firm that lobbied for the measure at the legislature didn't get the job.

And the lawsuit by Insure-Rite, Inc., over a state contract budgeted for $3.6 million per year has paid off. As a result of the company's unusual legal action, the state and the other bidders on the job have agreed to reopen the bidding process--which means that Insure-Rite, despite a troubled history in its home state, will get yet another chance to hit the jackpot in Colorado.

Insure-Rite's interest in Colorado began last year when company owner Richard Kasteler convinced lawmakers it was a good idea to farm out enforcement of the state's mandatory-insurance laws. One lawmaker questioned the idea, describing as "Big Brotherish" the notion of having a private firm send threatening letters to alleged scofflaws identified by a computer ("Power Steering," November 13, 1997). Questions were also raised about the program's effectiveness in Utah, where Insure-Rite has a history of mistakenly sending letters to people who have insurance.

But the measure passed anyway, making it through the legislature on the last day of the 1997 session. Registration fees went up by a dollar last September, and since then the money has been piling up in a special fund, waiting to be given to the lucky bidder.

Kasteler assumed that would be his firm. But when Colorado officials evaluated the bids last fall, Insure-Rite scored only 52 points out of 100 on a scale designed to measure how well companies would perform the task at hand. Insure-Rite scored poorly in most of the areas evaluated; the company, for instance, got just one of a possible seven points in the category of "effectiveness of cross matching."

Another bidder scored 98 and yet another 99. The cutoff for qualified candidates was 85, so state officials told Kasteler he wouldn't be getting the job.

What did Kasteler do in response?
He sued.
Kasteler declines to comment about his latest foray into Colorado, but his legal filings speak volumes--four volumes at last count, still on file at Denver District Court even though Kasteler dropped the suit after being promised another shot at the contract.

Kasteler has been pushing his insurance scheme since 1992, when he first had the idea of taking the computer files of insurance companies and comparing them against states' lists of registered drivers. His company would then send warning letters to people who appeared on a state's list but not the insurance list.

Kasteler said he could do this for less than a dollar per year per registered driver--a small price to pay, he argued, for getting uninsured drivers off the road. He took the idea to a firebrand Utah legislator who in turn shoved the legislation through that state's legislature, passing it on the final day of the 1994 session.

However, the program drew bad reviews when it got under way in 1995. Thousands of properly insured people started getting letters from Insure-Rite telling them they needed to get insurance. To this day, Kasteler stands by his claims that his company has reduced Utah's rate of uninsured motorists from 23 percent to 11 percent. But Utah officials say they're unable to verify those numbers, because Insure-Rite destroyed the computer files for the first two years of its program.

Despite his spotty record in Utah, Kasteler managed to sell his program in Colorado, primarily by hiring Bill Artist, one of the state's most influential lobbyists. Artist in turn handpicked sponsors to carry the bill: House Majority Leader Norma Anderson and state senator Elsie Lacy, whose latest pet project is getting a new stadium for Denver Broncos owner Pat Bowlen.

Using information supplied by Artist, Lacy and Anderson trumpeted figures showing that Colorado led the nation in uninsured motorists. But those figures were far from definitive; state officials say they believe Colorado is actually somewhere in the middle among the states, with about 10 percent of its motorists uninsured.

Most Colorado legislators never got word of Insure-Rite's abysmal record in Utah, and after the measure was passed, Insure-Rite bid on the job, along with several other firms. The state picked six companies to make oral presentations, including Insure-Rite. When the oral interviews were over, Insure-Rite and two other companies that had failed to attain a score of 85 were disqualified.

The two other companies didn't squawk, but Insure-Rite immediately began firing off letters of protest about the process. Court records show that the state conducted an internal review of the interview process but found Insure-Rite's claims of "arbitrary and capricious" treatment to be baseless.

Unhappy with that decision, Insure-Rite hired Denver attorney Scott Crabtree to take the matter to court. Crabtree says Insure-Rite had a legitimate beef with the process, mostly because the company wasn't sure exactly what information it was supposed to provide during the oral presentations. But the attorney for the winning bidder, Data National Corporation of Wheat Ridge, disagrees, noting that all the losing bidders have essentially the same perspective: "The process was flawed from their point of view only in that it didn't pick those companies," says John Palmquist.

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