The Sacramento Superior Court has granted the petition to issue a writ of mandate voiding the "emergency" regulation adopted by the California Department of Insurance to disallow the use of claims database information in making underwriting decisions -- particularly decisions to cancel or non-renew policies -- on homeowners insurance policies. The court concluded that Insurance Commissioner John Garamendi exceeded his authority in adopting the regulation.
While the Court's actual order is not available online, its tentative ruling is available. That ruling most likely reflects the grounds that will be invoked in the final order.
The Commissioner has vowed to continue his fight against the contested underwriting practices, and is supporting legislation paralleling the terms of the invalidated regulation. The tone of this battle is reflected in the Commissioner's press release responding to the Court's ruling:
It is clear the insurance industry does not have the best interests of the California consumer in mind. Well, I do. And I'm going to make sure that this abuse and discrimination is not allowed to continue.
[And my thanks to Connecticut attorney/blogger Doug Simpson of Unintended Consequences for his link to my earlier post on this story. Doug comes from a background in insurance regulation, and his blog focuses on "the collision of law, networks and disruptive technologies" in a variety of contexts. You will note its addition to the links at left.]
In keeping with his stated goal of making the Department of Insurance the country's "best consumer protection agency," Commissioner Garamendi is posturing this dispute as one between the "exploited" consumer and a "greedy" industry, without addressing the strengths or substantive weaknesses of the insurers' position that claims databases are a legitimate indicator of future risk, properly considered in accepting, declining or pricing a contract of insurance. (This blog takes no position on the merits of either side's position, not having access to all of the facts.)
It also appears that the Commissioner is at least as interested in pursuing his goals in the court of public opinion as he is in a legislative or regulatory forum, as evidenced by this report from the San Francisco Chronicle:
After Friday's court session, Garamendi called the insurance industry's claims of innocence 'a goddamn lie' and ordered an inspection of State Farm's underwriting and claims records. With nearly 1.5 million homes insured in California, State Farm is the largest home insurer in the state.
On Monday morning, three of Garamendi's agents -- with an entourage of a public relations person and four people from the media -- arrived at State Farm's office in Rohnert Park, demanding to see the company's records. State Farm representatives were polite and cooperative, albeit somewhat miffed at the short notice.
(Emphasis added.) Further reports to follow as this story continues to develop. . . .
Thanks for the kind word and link. Garamendi had some history the first time he was elected Commissioner, following Prop. 103. At a retrospective about that initiative, the Personal Insurance Federation of California had this to say in 2001: "CDI had approximately 600 employees before John Garamendi became the first elected regulator under Proposition 103. Mr. Garamendi served as insurance commissioner from 1991-1994. During his term the department’s staff grew to more than 1,100 employees and remains at that level today. The growth of CDI’s personnel to handle the extra workload has added $40 to $50 million to the department’s budget, bringing the total annual funding for CDI to over $157 million (FY-2000 proposed budget)." Source: http://www.pifc.org/insurance/prop103.html
Posted by: Doug Simpson | August 27, 2003 at 01:03 PM