Complaint filed by FTCR, pursuant to Section 1861.05 of Proposition 103

Published on

Challenging request for increase in medical malpractice liability insurance rates filed by American Healthcare Indemnity & SCPIE Indemnity Co. (11/12/02)

Harvey Rosenfield SBN 123082

Pamela Pressley SBN 180362


1750 Ocean Park Blvd., Suite 200

Santa Monica, CA 90405

Telephone: (310) 392-0522

Facsimile: (310) 392-8874




In the Matter of the Rate Application(s) of: American Healthcare Indemnity Company; and SCPIE Indemnity Company.

Applicants/Respondents. )









) FILE NOS.: 02-33562 and 02-33563


The Foundation for Taxpayer and Consumer (“FTCR”) hereby requests the Insurance Commissioner to schedule a public hearing on the above-referenced rate applications of American Healthcare Indemnity and SCPIE Indemnity Company (“SCPIE“) at which time SCPIE will be directed to appear and respond to the issues raised in this petition.

In support of its petition, FTCR alleges:



1. On or about September 16, 2002, American Healthcare Indemnity Company and SCPIE Indemnity Company submitted rate applications for a +15.6% rate change with the Insurance Commissioner for their commercial lines medical malpractice insurance (Professional Liability — Physicians and Surgeons), File Nos. 02-33562 and 02-33563 (the “SCPIE filings”). On September 27, 2002, the public was notified of the SCPIE filings.



2. Petitioner The Foundation of Taxpayer and Consumer Rights (“FTCR”) is a nonprofit, nonpartisan public interest corporation organized to represent the interests of insurance consumers, particularly as they relate to Proposition 103.

3. FTCR’s Director, Harvey Rosenfield, wrote Proposition 103 and led the successful campaign to have it enacted in 1988.

4. FTCR is supported by contributions from members of the public throughout California, and by foundation grants. Among FTCR’s supporters are policyholders as well as members of the public throughout the state of California. FTCR files this petition in the interest of medical malpractice insurance consumers and other consumers, including the patients to whom the costs of medical malpractice insurance are passed. Although consumer presence in departmental proceedings has a significant impact on policyholders’ rates, the amount for each individual consumer is outweighed by the time and expense of hiring individual counsel or an advocacy group to protect his or her rights. Thus, an independent group like FTCR with an established history of vigorously protecting the rights of consumers would add a voice that, otherwise, would be absent from these proceedings.

5. FTCR is dedicated to the promotion of insurance reform and the protection of the interests of all insurance consumers in matters before the Legislature, the courts, and the CDI. FTCR is particularly focused on the enforcement and implementation of Proposition 103, and acts to defend and enforce the provisions of the initiative and other consumer protection measures enacted for the benefit of consumers and policyholders.

6. The staff of FTCR and the outside persons with whom it consults include some of the nation’s foremost consumer advocates and experts on insurance ratemaking matters.

7. FTCR has served as a public watchdog with regard to insurance rates and insurer rollback liabilities under Proposition 103: monitoring rollback settlements and the status of the rollback regulations, reviewing and challenging rate filings made by insurers seeking rate increases, participating in hearings before the CDI, and educating the public concerning industry underwriting and rating practices and their rights under Proposition 103 and other provisions of state law. FTCR has appeared as amicus curiae in matters involving the interpretation and application of Proposition 103 and the Insurance Code.

8. FTCR has been permitted to intervene in several proceedings related to the implementation of Proposition 103‘s reforms. Proceedings in which FTCR has intervened include: (i) REB-5184, regarding State Farm‘s rollback liability, (ii) RH-318 and IH-93-3-REB, regarding regulations to implement Insurance Code section 1861.02’s provisions on rating factors for personal automobile insurance; (iii) RH-339 and RH-341, procedural rules for rate hearings and for intervention, among other proceedings; (iv) PA-95-0057-00 regarding Safeco‘s Earthquake Rate Application; (v) Consolidated hearing numbers PA-97-0078-00, AND PA-97-007900 regarding State Farm‘s, Allstate‘s and Farmers automobile class plans; (vi) PA-97-0072, regarding the California Earthquake Authority‘s rate application; (vii) RH-346, regarding regulations governing Advisory Organization Manuals; (viii) IH-97-0017-REB, regarding prior approval regulations, and IH-0017-TF, Prior Approval Task Force; (ix) IH-97-0018-REB III; (x) File No. PA-98-0099-00 regarding Allstate‘s Private Passenger Automobile Insurance Rate Application; (xi) RH-402 regarding the optional persistency auto rating factor; and (xii) RH-01015532, among others.



9. Should the Commissioner grant the requested public hearing, FTCR will present and elicit evidence that the rates proposed in the SCPIE filings are in violation of Proposition 103. Specifically, Insurance Code section 1861.05 (a) provides that “[n]o rate shall be approved or remain in effect which is excessive, inadequate, unfairly discriminatory’.”

10. Based on FTCR’s preliminary analysis of the SCPIE filings, FTCR believes that it will be able to present and elicit evidence at the requested public hearing to show that the rates proposed in the SCPIE filings violate Insurance Code section 1861.05(a) for at least the following reasons: 1) SCPIE‘s loss development factors are excessive; 2) SCPIE‘s basic limits trend factors are excessive; 3) SCPIE has not provided information for increased limits trend factors in the filing; 4) SCPIE‘s ULAE factor appears to be excessive; and 5) SCPIE‘s investment income on reserve appears to be understated.

11. SCPIE Indemnity has received rate increases of 8.4% in 2002, 10.6% in 2001 and 3.7% in 1999. American Healthcare Indemnity has received rate increases of 8.4% in 2002 and 10.6% in 2001.

12. This petition is based upon FTCR’s preliminary analysis of the SCPIE filings and FTCR reserves the right to modify, withdraw and/or add issues raised by the SCPIE filings as more information becomes available to FTCR.



13. The authority for this petition is Insurance Code section 1861.10(a) titled “Consumer Participation” which grants “any person” the right to initiate or intervene in a proceeding to enforce Proposition 103. Specifically, as stated above, FTCR initiates this hearing to enforce Insurance code Section 1861.05(a), which provides “No rate shall be approved or remain in effect which is excessive, inadequate, unfairly discriminatory or otherwise in violation of this chapter.”

14. Insurance Code section 1861.05(c) provides that the Commissioner “must hold a hearing upon a timely request” when “the proposed rate adjustment exceeds” ‘ “15% for commercial lines.” Because this petition is timely and because the requested rate adjustment exceeds 15% for commercial lines medical malpractice insurance, the Commissioner must grant this petition for hearing pursuant to Insurance Code section 1861.05(c). This petition is also authorized by Sections 2653.1 of the California Code of Regulations, Title 10.

15. This petition does not involve a rate which has been specifically approved by the Insurance Commissioner within the preceding 12 months.



16. Should the Insurance Commissioner grant a hearing on FTCR’s request, FTCR will seek to intervene in the hearing pursuant to Insurance Code section 1861.10 and file a petition to intervene pursuant to California Code of Regulations, title 10, section 2661.3.

WHEREFORE, FTCR respectfully requests that the Insurance Commissioner hold a hearing on the SCPIE filings.

DATED: November 12, 2002 Respectfully submitted,

Harvey Rosenfield

Pamela Pressley


By: ____________________________

Pamela Pressley


I, Pamela Pressley, verify:

1. I am an attorney employed by THE FOUNDATION FOR TAXPAYER AND CONSUMER RIGHTS. If called as a witness, I could and would testify competently to the facts stated in this verification.

2. On or about November 12, 2002, I personally prepared the pleading titled, “The Foundation For Taxpayer And Consumer Rights’ Petition for Hearing filed in this matter. All of the factual matters alleged therein are true of my own personal knowledge, or I believe them to be true after I conducted some inquiry and investigation.

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Executed on November 12, 2002, at Santa Monica, California.


Pamela Pressley

Consumer Watchdog
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