California FAIR plan critic reacts to regulator's counterpunches

Los Angeles-based consumer advocacy non-profit Consumer Watchdog alleges that the California Department of Insurance (CDI) and its commissioner Ricardo Lara solicited insurance industry criticisms of the group and included these comments as part of a certification ruling document. The ruling, issued August 2, devotes three of its 10 pages to industry criticisms of Consumer Watchdog.

Consumer Watchdog has received the certification as an intervenor, allowing it to be compensated for research and legal work on behalf of California insurance consumers, every two years since 1994 for a total of 15 times, according to its executive director, Carmen Balber. California’s Prop 103, passed by voters in November 1988, establishes protections against arbitrary rate increases, and also includes the intervenor application process. The Consumer Federation of California, United Policyholders and various independent individuals have also been certified and compensated as intervenors over the years.

Consumer Watchdog made its most recent request on June 3. Industry groups began submitting comments, and on June 13, an email from CDI attorney Edward Wu posted on CDI’s website solicited industry comments and gave a deadline of June 28. Balber said that Consumer Watchdog did not know CDI was soliciting comments until Wu called her on June 18 to ask for an extension beyond the required 15 day deadline that CDI had to rule on its completed request for intervenor certification. CDI’s solicitation of comments was placed under the “Insurers” tab not the “Consumers” tab on the top of its homepage, and then five layers or clicks deep under that tab to see the call for comments. 

CDI’s ruling mischaracterizes how Consumer Watchdog operates, as well, Balber said. “The department is stating incorrectly that we get half of our funding from intervenor fees, and that is a misinterpretation of what we put in that application,” she said, noting that it only allowed expenses to be entered a certain way. “The bucket that is attorney and intervenor fees includes our civil litigation as well. It’s not just our prop 103 participation, it’s also the civil court.”

Consumer Watchdog also does advocacy in other industries and fields.

In addition, CDI’s record of intervenor requests dating to 2013 contains incorrect links and information about the requests.

Harvey Rosenfield, founder of Consumer Watchdog.

Consumer Watchdog

Consumer Watchdog responded on July 11 in a 253-page legal communication to CDI. The communication, authored by group founder Harvey Rosenfield, litigation director Jerry Flanagan and staff attorneys Pamela Pressley and Benjamin Powell, stated, “No statute or regulation authorizes the Commissioner to solicit comments from the insurance industry or other ‘interested parties’ or for the insurance industry to weigh in on the completeness of a Request or whether organizations ‘represent the interests of consumers’ for purposes of being eligible to seek compensation in Department proceedings.”

The CDI ruling states “it is unclear what work Consumer Watchdog actually performed in the rate application process versus that of the Department,” and asserts that the organization does not have members or do direct outreach to insurance customers.

Consumer Watchdog, in its July 11 response, stated “Insurance companies argue Consumer Watchdog does not represent consumers, despite the fact that the group has saved consumers $6 billion in insurance premiums since 2002 in over 120 rate proceedings enforcing Proposition 103’s consumer protections—which, of course, is the precise reason for the industry vendetta playing out now in the Legislature and at the Department. That consumer savings was achieved, remarkably, with just $11.6 million in fees awarded to Consumer Watchdog for its substantial contribution in rate and rulemaking matters before the Department, about half of which went to outside actuaries and other experts. All told, that is less than 25 cents for every $100 saved.”

Balber also pointed out that CDI also solicited industry comment on a request for intervenor status by another group, Consumer Federation of California Education Foundation (CFCEF), submitted in June, but received no comments and has not published any responses or comments of its own on their request. Balber added that CFCEF, like Consumer Watchdog, does not have members either.

Consumer Watchdog’s response went on to say, “It is not up to the industry to decide whether a consumer group represents the interests of consumers, and a finding of eligibility certainly does not hinge on whether the insurance companies or the Department agree with a consumer group’s positions. Sixteen consumer and public interest groups all support granting Consumer Watchdog’s and CFCEF’s requests for finding of eligibility.”

Commenting on the matter, Balber said, “It really was unprecedented that he [Lara] even decided to give the insurance industry a forum to bash us. But that’s exactly what it was. And the industry used the opportunity to — and this is in our brief that we submitted — they said they wanted to punish us for our bad behavior. And the insurance commissioner enabled that by opening this process, and clearly is interested in silencing an independent voice for consumers.”

Balber added, “The tone of that decision is very clear that the commissioner would prefer we not participate at all. But if that were the case, consumers would lose money from the rates that we have been able to reduce, and a voice in the process. And when you have an insurance commissioner who has decided to walk lockstep with the insurance industry on rate increases and deregulation, that’s when you need a consumer voice in the mix.”

Most recently, Consumer Watchdog responded to the Commissioner’s July 26 announcement of changes to the state’s FAIR plan, a home insurer of last resort, by saying it will transfer the burden of supporting FAIR to homeowners. 

Asked by email why CDI approved Consumer Watchdog’s request for intervenor status despite the criticisms included, the regulator replied, “The ruling issued last week speaks for itself and we have no further comment on it.” 

A follow-up email asked CDI if it had ever previously asked for industry comment for a ruling on intervenor status or published solicited comments in such a ruling. CDI responded to this question with this statement, “We are working to address decades-long neglected issues, and increasing public participation in rate filings is critical. As we work to fix the state’s ongoing insurance crisis and implement new strategies for a lasting solution, transparency and public input into insurance decisions are key.”