Calif. Court Says Insurers Must Pay Consumer Advocate Fees

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A California appeals court ruled that the state’s insurers must compensate consumer advocacy groups when they take action to have a carrier’s rates rolled back, even when a settlement is reached without a hearing.

In a decision by a three-judge panel of the California Court of Appeals in Los Angeles, the judges upheld a lower court ruling saying that the court correctly awarded compensation to Consumer Watchdog, formerly known as the Foundation for Taxpayer and Consumer Rights (FTCR), for its work on proposed amendments to the Department of Insurance rules regarding insurance companies compensating interveners against rate increases.

An insurance trade group said no decision has been made on whether there will be an appeal of the ruling.

Under Proposition 103, the public has the right to challenge what are viewed as unjustified rate increases by insurers before the commissioner of insurance.

The rules were amended by the insurance department in 2006 to allow advocacy groups that substantially contribute to the rate-setting process to be compensated for their participation.

The appeals court upheld the lower court’s ruling that found the department was within its rights to create such a rule and that FTCR should be awarded $121,848 for administrative and court fees.

“We are disappointed with the court’s decision,” Sam Sorich, president of the Association of California Insurance Companies, told NU Online. “We think the court was incorrect in its ruling. Our view has always been that the statute clearly says that a consumer group involved in a hearing, not a rate filing, is entitled to advocacy fees.”

He said the law does not say that a consumer group is entitled to fees when there is no hearing, and the association, joined by the Personal Insurance Federation of California, the American Insurance Association, and the Pacific Association of Domestic Insurance Companies, continues to hold that view.

For consumer groups, the ruling was viewed as a major triumph.

“This important victory ensures that California motorists, homeowners and businesses will pay the lowest insurance premiums possible,” said Consumer Watchdog’s litigation director, Pam Pressley, in a statement.

“Like many other provisions of Proposition 103 that the insurance industry has tried to attack with lawsuits, this one has helped save Californians billions of dollars. Companies can only be made to obey the law when the public can challenge insurers’ attempts to illegally hike rates and actively participate in the rate review and approval process as Prop 103 requires,” said Ms. Pressley.

Mr. Sorich said no decision has been made to appeal the ruling to the state’s Supreme Court and counsel is studying the appeal court’s ruling. A decision my come as soon as next week.

A spokeswoman for the American Insurance Association declined to comment citing pending litigation.

Consumer Watchdog
Consumer Watchdog
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