Consumer Group Alleges California DOI Hid Open Records Evidence

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By Timothy Darragh, BESTWIRE

January 19, 2022

A consumer group is charging new evidence shows the California Department of Insurance has improperly withheld communications with representatives of a company linked to a 2019 fundraising scandal.

Consumer Watchdog pointed to a declaration filed in Los Angeles Superior Court by Rusty Areias, a lobbyist representing workers’ compensation insurer Applied Underwriters, stating he had “multiple” phone calls with Deputy Commissioner Bryant Henley and another department staffer also was on the calls but did not participate. He also said he had a brief conversation with Insurance Commissioner Ricardo Lara in 2019 regarding his lobbying for Applied Underwriters.

The department did not produce phone logs or other evidence of the calls in response to Consumer Watchdog’s open records lawsuit, the group said.

“The new evidence strongly suggests an attempted cover up of Commissioner Lara’s and Bryant Henley’s contact with top lobbyists seeking to secure political favors from Lara,” said Jerry Flanagan, litigation director for Consumer Watchdog. “Commissioner Lara can dispel this cloud of uncertainty by searching for and releasing all pertinent records and communications.”

Consumer Watchdog in 2020 filed a lawsuit against the department alleging it failed to disclose communications that were the subject of a California Public Records Act request (BestWire, Feb. 19, 2020).

The organization is seeking the records relating to 2019 revelations that Lara had taken campaign contributions from entities related to Applied Underwriters Chairman Steve Menzies while Menzies was looking for the department’s approval of a change in company ownership.

Lara had pledged not to take contributions from companies that had business before the department. After the news of the approximately $54,000 in contributions broke, Lara put a temporary freeze on campaign collections and returned donations.

Areias’ declaration contradicts department officials’ statements they did not know Areias and another lobbyist, Fabian Nunez, were representing Applied Underwriters, Consumer Watchdog said in a statement.

Areias last year sued Applied Underwriters, Menzies and others alleging Menzies failed to pay them for services related to a merger that saved the company from losing a $60 million deposit.

A spokesman for the department said it has “fully complied” with the Public Records Act request, adding he would not comment further with the matter still in litigation.

Applied Underwriters and its subsidiary, California Insurance Co., are not parties to the Consumer Watchdog/Insurance Department dispute, said CIC Vice President and General Counsel Jeffrey Silver. However, the department’s lack of transparency and probity are well known, he said.

The lobbyists had conversations with insurance department officials, but were “unreasonably obstructed” by the department, which “aimed to impede our company,” Silver said in a statement.

CIC has been in court with the department since it placed the company in a conservatorship in 2019, blocking its merger and redomiciling plans (BestWire, July 8, 2021). CIC is contesting the action, saying it was “high-handed” and “illegal.”

Applied Underwriters’ plans for CIC violated California law, a position upheld in state and federal courts, department spokesman Michael Soller said. The motion to approve the conservation plan for CIC is scheduled for June 2022, he said.

CIC currently has a Best’s Financial Strength Rating of A (Excellent).

(By Timothy Darragh, associate editor, BestWeek: [email protected])

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