CA Dept. of Insurance Failed to Search For Records Linked To Government Corruption Scandal

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Appeal Seeks to Confirm Under PRA Law That Agencies May Not Ignore Evidence of Responsive Records

Los Angeles, CA – The non-profit Consumer Watchdog has filed an appeal in its California Public Records Act (“PRA”) lawsuit against Insurance Commissioner Ricardo Lara and the California Department of Insurance.
According to the lawsuit, the Department failed to search for records of meetings and communications with worker’s compensation insurer Applied Underwriters (“Applied”) and three other companies involved in a government corruption scandal.    
Consumer Watchdog appealed a ruling by Superior Court Judge Mitchell Beckloff, arguing the trial court committed reversible error in determining that under the PRA an agency need not follow up on evidence of additional records discovered in the course of its own search.
Download Consumer Watchdog’s brief.
“Our California Constitution guarantees the public’s access to government records. Yet, state agencies routinely abuse disclosure laws,” said Consumer Watchdog Litigation Director Jerry Flanagan. “We hope the Court of Appeal will send a clear message that state agencies must not be allowed to ignore clear evidence of public records. Access to information concerning the conduct of the people’s business is a critical weapon in the fight against government corruption.”
In early 2019, individuals linked to Applied and three other companies made at least $54,300 in campaign contributions to Commissioner Lara’s 2022 re-election campaign. Some of the contributions were made in the names of relatives of company executives, apparently to hide their true sources. Commissioner Lara then ordered Administrative Law Judges to reverse their prior orders in at least four proceedings pending before the Department to benefit Applied. Applied also stood to gain if Commissioner Lara approved the sale of Applied’s affiliate, California Insurance Company. 
In the wake of statewide news reports of the pay-to-play scandal, Consumer Watchdog filed two PRA requests with the Department seeking communications and meeting records.
Because Consumer Watchdog could not and did not know, and still does not know, the names of all the individuals involved, the group sought records relating to certain named individuals as well as any other individuals “employed by or representing” Applied.
The trial court committed reversible error in determining that under the PRA, an agency need not follow up on evidence of additional records discovered in the course of its own search, according Consumer Watchdog’s brief.
As noted in the brief,
“In response to the CPRA requests, the California Department of Insurance . . . produced 60 pages of records regarding meetings with company representatives. The public records produced . . . revealed two individuals . . . who were representing Applied. Moreover, Commissioner Ricardo Lara and senior agency personnel overseeing the search were put on notice through direct communications that at least two other individuals, including former Speaker of the State Assembly-turned-lobbyist Fabian Núñez, were likely representing Applied during the time-period relevant to the CPRA requests. Yet despite those clear leads, the agency failed to update its search terms to determine whether any other responsive records associated with the four individuals existed.”
The trial court also erred by narrowly assessing the reasonableness of the agency’s search for records based on the limited knowledge of the handful of Department staff responsible for responding to Consumer Watchdog’s CPRA requests, rather than agency personnel familiar with the documents.
To remedy these errors and ensure that the public continues to have access to all types of public records, Consumer Watchdog’s appeal requests that the Court of Appeal remand the case to the trial court with instructions on the correct legal standard to apply.
The California Department of Insurance is the largest state agency in the country and is responsible for regulating the $310 billion insurance industry in California. “The public needs transparency to ensure that insurance companies are not receiving special favors from regulators that make coverage more costly,” according to Flanagan.

The appeal, Consumer Watchdog v. Superior Court (Real Parties in Interest Commissioner Ricardo Lara and the Dep. of Insurance) Case No. B326643, is pending in the California Court of Appeal, Second Appellate District in Los Angeles, California.

Jerry Flanagan
Jerry Flanagan
Jerry Flanagan is Consumer Watchdog's Litigation Director. Flanagan leads Consumer Watchdog’s litigation efforts in the areas of health insurance coverage and access to treatments. He has over 20 years experience working in public interest and health care policy, legislation and litigation.

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