Potential Changes to Prior Approval Regulations for Property/Casualty Insurers Under Consideration by California Department of Insurance
By Robert W. Hogeboom, Samuel Sorich and Steven Weinstein
On November 10, 2011, the California Department of Insurance (“CDI” or “Department”) conducted a workshop to consider potential changes to regulations that govern prior approval of property/casualty insurance rates and class plan applications. The list of topics discussed at the workshop is included in the CDI Notice of Workshop Regarding the Scope of Prior Approval dated September 21, 2011.
The workshop grew out of the 2010 MacKay v. Superior Court case in which the court held, among other things, that Insurance Code Section 1860.1 exempts approved rates from civil actions and that such rates are subject only to a limited prospective challenge by administrative procedure (under Insurance Code Section 1858 et seq.).
Barger & Wolen was counsel for the prevailing insurer, 21st Century Insurance Company, in MacKay, and our two blogs on the MacKay case can be accessed here and here.
MacKay involved 21st Century’s use of the accident verification factor which plaintiffs asserted was not an approved rating factor, but only an unapproved underwriting guideline.
The court concluded that the “language submitted to the Department for approval” is what is relevant as to whether a guideline is “submitted to the Department as a factor affecting the rates to be charged.”
Here, though accident verification was contained as an underwriting guideline, the insurer explained the use of accident verification in an exhibit to its rate application as affecting the rates to be charged and had been approved by the Department.
Based on MacKay, the use of underwriting guidelines was a prominent issue in the workshop.
Heading the workshop from the CDI were General Counsel Adam Cole, Joel Laucher, Chief Deputy of Rate Regulation, and Bryant Henley, Senior Counsel for the Rate Enforcement Bureau.
While there was an exchange of views among insurer representatives, representatives of consumer groups and the CDI staff, no decisions were made at the workshop.
Mr. Cole announced that interested parties have until December 1, 2011, to submit written comments on the workshop topics.
At that point, the CDI presumably will review the workshop record and determine whether to propose any new regulations relating to the workshop topics.
Following is a summary of the key issues discussed at the workshop:
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