Monday, January 4, 2010
Court Allows Compensation for Interveners in Insurance Rate Challenges That Settle
By STEVEN M. ELLIS, Staff Writer
Consumer interest interveners who take part in the administrative process when an insurance company seeks to increase rates can obtain compensation for their participation even if the matter settles without reaching a formal rate hearing, this district’s Court of Appeal has ruled.
Div. One on Wednesday rejected a challenge to regulatory changes pushed in 2006 by Insurance Commissioner Steve Poizner which provide for compensation to interveners when an order or decision is issued by the commissioner on an insurer’s rate-setting application.
The Association of California Insurance Companies, The Personal Insurance Federation of California, The American Insurance Association and The Pacific Association of Domestic Insurance Companies filed a petition for a peremptory writ of mandate and complaint for declaratory and injunctive relief, claiming the amended regulations conflicted with the Insurance Code by permitting compensation without a formal rate hearing.
California voters in 1988 enacted an initiative measure designated on the ballot as Proposition 103, which was codified, among others, at Secs. 1861.05 and 1861.10 of the Insurance Code. The measure required approval of insurance rate increases by the insurance commissioner, provided for consumer participation in the administrative rate-setting process, and permitted the recovery of advocacy and witness fees and expenses under certain circumstances.
The Department of Insurance promulgated regulations regarding intervention in the rate-setting process in 1995, and in 2006 Poizner sought to change the definition of a “proceeding” so that those who made a substantial contribution could obtain compensation in the event the matter was settled or withdrawn instead of proceeding to a hearing.
The insurers contended the proposed regulations, which took effect in 2007, conflicted with Secs. 1861.05 and 1861.10, but Poizner—joined by The Foundation for Taxpayer and Consumer Rights as intervener—opposed the challenge.
Writ of Mandate
Los Angeles Superior Court Judge James C. Chalfant denied the insurers’ request for a writ of mandate and dismissed their complaint for declaratory and injunctive relief. He also issued an order awarding compensation to the foundation.
The insurers appealed, but Justice Robert M. Mallano wrote that the judgment was correct because the regulations were “consistent with the governing statutes and reasonably necessary to effectuate the purposes of those statutes.”
Citing the California Supreme Court’s 1976 decision in Credit Ins. Gen. Agents Assn. v. Payne 16 Cal.3d 651, he explained:
“[T]he absence of specific statutory provisions in Proposition 103 relating to the resolution of a rate application without a public hearing, as, for example, by way of a settlement, does not mean that regulations permitting such resolution exceed statutory authority, but only that the electorate deferred to and relied upon the expertise of the Commissioner as to such matters.”
Mallano also said that Chalfant correctly awarded compensation to the foundation under Sec. 1861.10(b), and was not limited by subsection (a) which allows any person to initiate or intervene “in any proceeding permitted or established pursuant to [chapter 9], challenge any action of the commissioner under [article 10], and enforce any provision of this article.”
The justice wrote that judicial review of a regulation was such a proceeding, and said Chalfant did not abuse his discretion in ordering the insurers—rather than the Department of Insurance—to pay the award to the foundation.
Justices Frances Rothschild and Victoria Gerrard Chaney joined Mallano in his opinion.
The case is Association of California Insurance Companies v. Poizner, B208402.
Copyright 2010, Metropolitan News Company