Judge Upholds Insurance Commissioner’s Awarding of Fees to Advocacy Groups

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LOS ANGELES, CA — Rejecting a challenge by insurance groups, a Los
Angeles judge ruled today that the state insurance commissioner can
continue awarding compensation to members of consumer groups who take
part in rate review processes.

The insurance organizations filed a petition last May 25 in
Los Angeles Superior Court asking that state Insurance Code regulations
amended under the previous insurance commissioner, John Garamendi, be
invalidated on grounds the "advocacy fees" are unlawful and unfair to
the insurers who have to pay for them.

"We’re not talking (small) change here, we’re talking big
bucks," said Robert W. Hogeboom, an attorney for the insurers. "We
can’t trump the statute, we can’t change it with a regulation."

Hogeboom represents the Association of California Insurance
Companies, the Personal Insurance Federation of California, the
American Insurance Association and the Pacific Association of Domestic
Insurance Companies. But Judge James C. Chalfant said the amended
rules, which continue under current insurance commissioner, Steve
Poizner, are lawful.

"Is the commissioner authorized to do what he did? Yeah,"
Chalfant said. "I don’t decide policy, I just decide whether it is
adhered to."

The regulations were supported by the Santa Monica-based
Foundation for Taxpayer and Consumer Rights, which was founded by
Proposition 103 author Harvey Rosenfield and intervened as a defendant
with the insurance commissioner to keep the amended rules in place.

Proposition 103 was enacted by voters in November 1988 to reduce and control insurance rates.

Rosenfield attended today’s hearing.

Pamela Pressley, an attorney for the foundation, said the
advocacy fees can cover anything from travel expenses for consumer
groups to expert witness fees. She said the groups that want to have a
say in rate-setting procedures must prove they are acting in behalf of

Hogeboom stated in his court papers that the advocacy fees are
inappropriate because the Insurance Code strikes a balance between "the
desire to encourage consumer participation and the need to place a
check against potential abuses of the system…"

When consumer groups are given broad authority to take part and
ask for payment without being subjected to meaningful limitation, "the
commissioner is not encouraging legitimate participation by consumers,
but is only encouraging the filing of frivolous challenges by
opportunistic persons," according to Hogeboom.

Consumer Watchdog
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