Transparency or retaliation? State insurance chief accused of targeting critic

Jeff McDonald, The San Diego Union-TribuneSan Diego Union-Tribune

The consumer advocacy group whose landmark ballot measure created the elected state insurance commissioner has lost — at least for now — the ability to collect payments for its work challenging rate-hike applications filed by insurers.

For the first time since what’s known as the intervenor-compensation program was put in place, Consumer Watchdog became technically ineligible Friday to participate in rate-setting cases because its status as a certified intervenor ran out before it was reissued.

The delay came as a result of a new policy put forward by California Insurance Commissioner Ricardo Lara. The Department of Insurance says the Los Angeles-based consumer group has not complied with a new state program that promotes transparency and accountability for intervenors.

But the Consumer Watchdog president and others see the effort as retaliation against the nonprofit advocacy group for its years-long criticism of the state’s top insurance regulator as home and auto insurance rates have soared.

“Orwellian,” the Consumer Watchdog legal team wrote in a filing in support of its recertification. “That is the best way to describe the current situation.”

Department of Insurance spokesperson Gabriel Sanchez said the agency opened the certification process to public comments to boost participation in what historically has been a closed administrative process.

Consumer Watchdog is grumbling about negative feedback the department received from insurers, he said.

“It’s unfortunate they are being defensive, but nobody is exempt, and public participation is fundamental,” Sanchez said by email. “They wrote this requirement. Why shouldn’t that same standard apply to them?”

Jamie Court, the Consumer Watchdog president who has repeatedly challenged insurance rate cases and Lara’s acceptance of campaign donations from people with business before his department, said the effort to slow or stop the usually routine certification appears retaliatory.

He said the timing is especially bad because without the recertification, Consumer Watchdog might be shut out of a rate case presented by State Farm that asks for a 30 percent increase in homeowners’ insurance policies.

“If we are not allowed to intervene in that pending rate hike, it could cost policyholders hundreds of millions of dollars more on their insurance bills,” Court said. “Last year we saved State Farm policyholders $200 million by lowering their proposed rate.”

U.S. Rep. John Garamendi, a Bay Area Democrat who previously served two terms as California insurance commissioner, called the delay in re-certifying Consumer Watchdog’s intervenor status the result of what he believes is a personal grudge.

“The specific vendetta against Consumer Watchdog is certainly troublesome in and of itself, but the much larger issue is it’s a warning to other advocacy groups to be cautious and careful as they challenge the commissioner,” Garamendi said.

“It is a signal that will result in a very bad situation in which consumer organizations will not be aggressive in protecting consumers because they fear the power of the commissioner,” he added.

Under the intervenor-compensation program, third parties are allowed to challenge rates proposed by insurance companies, offering expert testimony and other evidence to refute an insurer’s claim for proposed increases.

If their work results in significant savings to consumers in a rate-setting case, they are entitled to seek compensation for their attorneys and other expenses. Intervenors typically submit a payment request, and then regulators approve all or part of the request.

Consumer Watchdog, which in 1988 organized and passed the Proposition 103 ballot measure that created the elected office of insurance regulator rather than a political appointee, says it has saved consumers more than $6 billion since 2002 in more than 120 cases.

The Consumer Watchdog filing submitted Thursday cites its history of being re-certified without challenges, most recently last year. The 253-page document also includes the group’s record of being awarded payments for significant work that helped lower insurance premiums.

The advocacy group’s certification formally lapsed on Friday. Lara has said he would make a decision on the recertification request by early next month.