New Actions By State Insurance Commissioner Appear To Benefit Another Campaign Donor

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July 29, 2019

One day in April, the California Assembly insurance committee passed a pet insurance bill that critics say could make it harder for consumers to collect benefits.

That same day, Darlene Graber wrote a check to Insurance Commissioner Ricardo Lara’s re-election campaign for $7,800.

Graber is a homemaker from Austin, Texas, according to state campaign disclosures.

Records show she shares an address with Larry Graber, an executive with Independence Holding Co., a New York insurance conglomerate that markets pet insurance and other products around the country. It was not clear if the Grabers are married.

Lara, whose Department of Insurance sponsored the pet insurance bill, has been promoting healthcare policies for dogs and cats on social media.

His office also is evaluating a 43 percent rate increase proposed by a subsidiary of Independence Holding Co., records show.

Michael Soller, a spokesman for the state insurance department, said the proposed pet insurance bill will help pet owners cut through third-party administrators and other impediments when seeking to collect benefits. The bill also adds a requirement that pet insurance policies disclose the contact information of the entity responsible for the policy, he said.

“There is really no other way to look at this bill other than directly benefiting consumers,” Soller said in a telephone interview. “If anything, insurers benefit when pet owners are confused about their existing policies or can’t figure out where to file claims or where to make complaints.”

Critics say the bill also says policyholders should not file complaints with the state until after they discuss their dispute with the insurer, an added step that could limit the ability of pet owners to collect benefits.

“The department should be contacted only after discussions with the insurer, or its agent or other representative, have failed to produce a satisfactory resolution of the problem,” the bill states.

Soller said the distinction is immaterial because his department will respond to consumer complaints.

“You can file a complaint with the department at any time, whether or not you have attempted to resolve the issue with your insurer,” he said. The California Department of Insurance “has never failed to open a case or answer a call on our hotline if the consumer has not first contacted the insurer.”

Pet insurance is a roughly $1 billion industry in the United States.

Recent news reports have raised questions about the quality of some pet insurance policies, which are designed to pay for veterinary treatment for household pets but often include co-payments and deductibles that reduce the cost-effectiveness of the insurance.

Soller declined to respond to questions about the Graber campaign contribution or the rate increase proposed by the Independence Holding Co. subsidiary.

The Grabers did not respond to email or telephone messages seeking information about the donation.

Earlier this month, The San Diego Union-Tribune reported that Lara or his office intervened four times in proceedings to help the workers’ compensation insurer Applied Underwriters after Lara’s campaign accepted tens of thousands of dollars in political donations from a company executive and his spouse.

The insurance commissioner and his top deputy twice overruled department judges who had issued decisions ordering Applied Underwriters to rebate excessive fees to employers who had purchased workers’ compensation policies.

In two other cases, the commissioner ordered judges to reopen cases filed by disgruntled Applied Underwriters’ customers after the judges had issued decisions affecting Applied Underwriters.

Following the Union-Tribune reports, Lara pledged to return the contributions and to recuse himself from votes related to Applied Underwriters, which has dozens of complaints pending before the Department of Insurance.

It also was fined $3 million by New York regulators earlier this month for selling problematic workers’ compensation policies in that state.

Jamie Court, president of the Los Angeles advocacy group Consumer Watchdog, said the elected insurance commissioner has no business accepting campaign donations from anyone linked to the insurance business.

“Why would a Texas homemaker make a $7,800 contribution to a California insurance commissioner?” Court asked.

The proposed legislation, Assembly Bill 1535, passed the statehouse this month without a single vote in opposition.

It was presented last week to Gov. Gavin Newsom, who has until Tuesday to support or reject it. The governor’s press office declined to say if he will sign the bill.

“As is the case with all bills pending before the governor, this measure will be evaluated on its own merits,” Newsom spokeswoman Vicky Waters wrote in an email.

Consumer Watchdog said the proposed provision would put policyholders at a disadvantage because they typically cannot afford to litigate a claim over a veterinarian bill, and lawyers are unlikely to take their case on contingency because the potential damages are too small, compared with health care cases involving humans.

“That can be used as leverage to force policyholders to settle their claims on the cheap, a problem that is pervasive in the pet insurance industry,” Court said in a letter urging Newsom to veto the bill.

Lara, 44, is a graduate of San Diego State University and former state senator from Bell Gardens. He was elected to statewide office in November after promising not to accept political contributions from insurance industry officials.

California insurance commissioners historically have resisted accepting campaign contributions from companies they regulate since former commissioner Chuck Quackenbush, who resigned in 2000 after media reports that he used insurance company donations to promote himself and to benefit donors.

The Insurance Commissioner is an elected post that oversees some $310 billion worth of insurance sold in California each year.

Rey Lopez-Calderon, the executive director of California Common Cause, a nonprofit good-government group, said Lara has been involved in state politics too long to be accepting political contributions from people he regulates — or their spouses.

“This is unfortunately a problem that is systemic — not just related to the insurance industry,” Lopez-Calderon said. “ For someone who has been a leader as a state legislator in our community, he needs to be above reproach.”

Consumer Watchdog last month filed a California Public Records Act request for copies of Lara’s monthly schedule of meetings and other appointments in order to determine whether the insurance commissioner is improperly communicating with companies he regulates.

Lara told reporters last week that the request is being processed.

On July 10, the Twitter account for the Department of Insurance urged followers to observe National Kitten Day by purchasing pet insurance.

“Let today be a reminder to consider pet #insurance to protect your furry little friend,” the department tweeted. “This coverage will help pay for veterinary expenses necessary for taking care of your kitten or other pets.”

Jeff McDonald

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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