By Camille Von Kaenel, POLITICO
SACRAMENTO, California — California Insurance Commissioner Ricardo Lara is running into opposition from his own agency as he tries to entice insurers back to the state’s disaster-prone market.
What happened: Lara, an elected Democrat and former state lawmaker from Los Angeles, is sparring with a judge at his agency who has sought more authority over approval of rate increases.
Tensions came to a head at a Friday hearing, which chief administrative law judge Kristin Rosi held despite Lara’s Dec. 9 order not to and where she listened to Consumer Watchdog’s objections to Lara’s attempts to intervene in the proceedings.
“It’s a classic showdown between a regulator and a judge,” Consumer Watchdog President Jamie Court said after the hearing.
Why this matters: Lara is nearing the end of a series of reforms aimed at making it easier for property insurers to do business in California so they will return to the state and cover homeowners in fire-prone areas. He’s also faced accusations of being too friendly with the insurance industry since the start of his term, including a call last month by Rep. John Garamendi, a former insurance commissioner, for him to step aside.
The power struggle has alarmed administrative law experts. Robert Fellmeth, a law professor at the University of San Diego, said agency heads have some jurisdiction over administrative law judges’ scheduling but can’t try to influence cases’ outcome.
“He’s in fraught territory,” Fellmeth said of Lara.
Department spokesperson Michael Soller said in an email the commissioner was acting within his jurisdiction.
“The Commissioner leaves the matter of supervising the ALJs to their supervisor,” he said. “He is simply meeting his responsibilities as Insurance Commissioner.”
Background: Rosi’s initial ruling in October determined some rate hikes approved by department staff needed an additional layer of approval by an administrative law judge before they could go into effect. The insurance industry argued against the determination, calling the extra step burdensome at a time when business is already hard.
Lara last month struck out that part of the ruling, saying it conflicts with longstanding departmental policies. He also sent the judge a letter detailing and limiting her duties, which the judge then published as an ex parte communication.
When the judge called a hearing to consider the communications, Lara issued an order canceling the hearing and withdrawing the notice of ex parte communication, calling it a matter of procedure.
Consumer Watchdog, an organization that intervenes in rate reviews in exchange for compensation through the department, argued in a legal filing that Lara’s letter and order make up an “unlawful effort to supervise the Administrative Law Judges” and that the commissioner “lacks any statutory authority to vacate a proceeding being actively administered by the judges.”
Rosi called Consumer Watchdog’s objections “well-grounded and uncontested” in another filing and went ahead and held the hearing last Friday, at which only Consumer Watchdog spoke.
What’s next: Rosi has yet to issue another ruling.
The dispute will continue to unspool next year, when Lara’s rules allowing property insurers to use forward-looking models in their rate-setting and pass along the cost of reinsurance will come into effect and Consumer Watchdog is likely to request hearings on some of the insurers’ subsequent rate requests.