Robert Hogeboom

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Insurance Regulator Too 'Aggressive,' Insurers Say

Four insurance companies sued the California Department of Insurance, claiming the agency has become "increasingly aggressive" in its efforts to enforce the state's Unfair Insurance Practices Act.

The companies say the department is trying to enforce the UPA beyond the scope of the original statute, by wanting to impose "millions of dollars in monetary penalties" against insurance companies.

In statute form, the UPA outlines 16 unfair claims settlement practices that companies must avoid in order to be compliant with the law. Prohibited practices include misrepresenting pertinent facts or policy revisions to clients, compelling insured clients to pursue litigation to recover amounts due, and attempting to settle a claim for less than a "reasonable" amount.

But the four plaintiffs known as the Torchmark group of companies said the department has been adding to the original 16 practices, creating 25 "categories of acts" that outline specific conduct to be followed or prohibited in the settlement of claims.

The Torchmark group includes Globe Life and Accident Insurance Company, American Income Life Insurance Company, United American Insurance Company and United Investors Life Insurance Company and is represented in the suit by Robert Hogeboom of the Los Angeles firm Hinshaw & Culbertson.

READ MORE at Courthouse News Service

California Insurers Asked to Submit Diversity Information About Boards of Directors

by Robert Hogeboom & Samuel Sorich

The California Department of Insurance (“CDI”) has issued a notification to insurers with 2013 written premiums of $100 million or more in California to complete and submit the CDI’s Governing Board Diversity Survey.

Among other questions, the Survey asks the insurers to report on the number of directors who identify themselves as a man or a woman, how many are comprised from seven different ethnic group categories, and how many are a disabled veteran, lesbian, gay, bisexual, and/or transgender.

Completed surveys, including an affidavit on the data, are to be submitted to the CDI by August 12, 2014. All surveys will be posted on the CDI website by October 1, 2014. The notification advises that survey results will be posted on the CDI’s website and that “[f]ailure to submit a complete report or submit a report by the due date will be noted,” which we presume will be noted on the CDI website.

The Survey stems from a recommendation put forward by the CDI’s Diversity Task Force which was created shortly after the Commissioner office.

Several existing statutes require insurers to submit reports or respond to data calls on other somewhat related topics:

Insurance Code section 926.2 requires each insurer admitted in California to provide information on all its community development investments and community development infrastructure investments in California.

Insurance Code section 926.3 requires each admitted insurer writing $100 million or more in annual premiums in California to file policy statements expressing goals for community development investments and community development infrastructure investments.

Insurance Code section 927.2 requires each admitted insurer writing $100 million or more in annual premiums in California to submit reports on minority, women, and disabled veteran-owned business procurement efforts.

In contrast, there is no statute which specifically states a requirement to report on the diversity of insurance companies’ boards of directors. The department’s notification to insurers does not cite the statutory authority for the Survey.

For copies of the report or questions, please contact Robert W. Hogeboom at or (213) 614-7304.

Recent Victory on Behalf of Medical Supplement Insurers against California Department of Insurance

As a result of the filing of a Writ of Mandate and Declaratory Relief Action by Barger & Wolen LLP Senior Regulatory Counsel Robert W. Hogeboom and Litigation Partner John Holmes, the California Department of Insurance (“CDI”) agreed to cease and desist its practice of requiring insurers to file and pay fees on insurer notices to policyholders policyholder “notices” in connection with Medicare supplement policies. Further, the CDI agreed to refund to each of the plaintiff insurers in the suit all filing fees that had been paid to the CDI since 2012.

The action was filed on behalf of five Torchmark Group insurers who issue Medicare supplement insurance policies in California. Under California Insurance Code (“CIC”) § 10192.14(c), each insurer is required to submit an annual rate filing for each Medicare supplement product to demonstrate compliance with a minimum lifetime loss ratio requirement.   

Since June 2012, the CDI has required insurers which issue Medicare supplement policies to file and seek approval for each form of “notice” to policyholders. The term “notice” was broadly defined by the CDI to include invoices, friendly reminder letters, changes in premium, lapse notices, etc. The CDI alleged that all of these notices were “policy forms” subject to approval under CIC § 10192.15(a). Each notice was subject to a filing fee of $460. 

The CDI also withheld approval of rate filings pending the filing of notices and payment of filing fees notwithstanding that actuarial approval had been given. The notice filing fees alone aggregated approximately $15,000 each year for the plaintiff insurers. 

A Writ of Mandate and complaint for Declaratory and Injunctive Relief was filed against the CDI alleging that the notices were not “policy forms” within the meaning of CIC § 10192.15(a). Further, we alleged the CDI had no authority to disapprove a rate filing based on failure to file notices for approval. 

Prior to a hearing on the action, the CDI agreed to discontinue the notice filing requirements and fee charges. The CDI also agreed to refund all filing fees that had been previously collected.



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Administrative Law Judge Invalidates Fair Claims Settlement Practices Regulations by California Department of Insurance

Insurance companies could soon be off the hook for stiff penalties and fines imposed by the California Department of Insurance’s (“CDI”) for violations of the Fair Claims Settlement Practices Regulations (“FCPR”).  This is according to California Administrative Law Judge Stephen J. Smith, who recently issued a 51-page ruling finding the CDI’s Fair Claims Settlement Practices Regulations might not be brought as unfair claims acts.  

This ruling affects how the CDI has imposed penalties against insurers for claims since the inception of the FCPR in 1992. Since that time, only two cases have gone to adjudication challenging the procedure, and fines, as most insurance companies have chosen to settle. In both cases, the insurance companies -- an auto insurer and a life and health insurer -- retained Robert Hogeboom, senior insurance regulatory attorney with Barger & Wolen, to represent them.

In the most recent decision, Judge Smith’s ruling was based on the CDI’s Order to Show Cause (“OSC”) action alleging 697 violations against the five Torchmark groups of life and health insurers.

According to Hogeboom,

This ruling is an extraordinary indictment of the FCPR because for the past 20 years the CDI has required insurers to follow the FCPR under threat of an OSC proceeding and large fines."  

This may also result in changes to Market Conduct Examinations if they are to serve as the basis for an OSC proceeding.  

The decision will impact all lines of insurance regulated by the DOI.

Full Analysis of the Decision

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SB 631 - Restitution Bill Update

Robert Hogeboom Testifies on California Restitution Remedy Bill

On April 28, 2011, Barger & Wolen Senior Regulatory Counsel, Robert W. Hogeboom, testified before the Senate Insurance Committee as an industry expert opposing Senate Bill 631

SB 631, as drafted, would give the Insurance Commissioner additional remedies of restitution and reimbursement of attorney’s fees and costs in California Department of Insurance enforcement actions brought on behalf of consumers claiming wrongful conduct by insurers or other licensees, including producers. For more details, please see New Restitution Remedy Proposed for Insurers and Licensees in California.

Immediately before the Senate Insurance Committee hearing, author Senator Noreen Evans (D-District 2) announced her decision to make SB 631 a two-year bill. Her decision is presumed to be the result of the Legislative Counsel’s opinion to the Senate Insurance Committee raising California constitutional issues that the legislation may give the Commissioner remedies only available to the courts. 

At the hearing, Hogeboom testified that the legislation would violate the separation of powers clause in the California Constitution. Restitution is only given to quasi-judicial entities such as the California Workers’ Compensation Appeals Board. Further, reimbursement of attorney’s fees and costs would exceed even the power of the courts in most cases. 

Hogeboom also testified that because the legislation would extend payment of restitution for violations of Proposition 103’s rating law, the bill would likely require a two-thirds vote of the Legislature to pass.

Based on his lengthy experience as an enforcement regulatory lawyer, Hogeboom testified that the measure would actually hinder due process rights from licensees because many producer licensees would not be able to afford an administrative hearing when they face the risk of having to pay both restitution and reimbursement of attorney’s fees and costs. This would give the CDI more leverage in forcing licensees into settlements. 

Following the April 28, 2011 hearing, the bill was put over for another year in order to more fully explore its legal issues.

For more information, contact Robert Hogeboom at (213) 614-7304 or

Recent Trends in Market Conduct Examinations

Led by Robert W. Hogeboom, with special commentary from Robert J. Cerny and Western General Insurance Company General Counsel, Daniel Mallut, Recent Trends in Market Conduct Examinations will cover:

  • The statutory framework for claims examinations and what §790.03(h) really means
  • Understanding the Unfair Claims Settlement Regulations and how, if and when they relate to a §790.03 violation
  • The examination process—new trends on which the examination will focus
  • Negotiation, resolution and cost
  • Order to Show Cause hearing process
  • New issues in market conduct compliance

When:   Wednesday, December 8, 2010
Where:  Los Angeles Airport Marriott
            5855 West Century Boulevard
            Los Angeles, CA 90045
Time:    10:00 a.m.—2:00 p.m. (lunch provided)

Who should attend? In-house counsel and senior claims personnel who specialize in the claims examination process and disciplinary actions in California.

For more information, or to register for the event: Please e-mail Heather Milligan here or 213.614.7382.

California CLE credits are provided.

"Any One Act Test" Rejected by Court in Favor of "Totality of the Circumstances"

In a non-published decision issued on November 18, 2010, the California Court of Appeal affirmed summary judgment against class-action lawyers seeking refunds on broker fees in Munn v. Eastwood Insurance Services.  

The decision rejected the argument that if a broker performs any act on behalf of the insurer, the broker is a de facto agent, and subjects the broker to a refund of all broker fees collected. 

The court rejected the “any one act test” and followed the “totality of the circumstances test,” which has been advocated by this firm for several years as the appropriate test to distinguish the difference between an agent and broker.

The “totality of the circumstances test” was codified into law by legislation in 2008 (AB 2956) that Barger & Wolen Senior Regulatory Partner Robert Hogeboom helped draft.

The court’s decision upheld the FSC comparative rater and the electronic Zap App systems as the appropriate mechanisms for brokers to input information and process applications, and it rejected the plaintiffs’ claim that it was a process to encourage upfront underwriting and binding by the broker. 

Finally, the court recognized that the recent amendment to California Insurance Code section 1623, which includes the definition of “broker” and creates a presumption, did provide the court with “guidance in assessing the facts as part of the totality of the circumstances.” 

Barger & Wolen’s Robert Hogeboom and Suh Choi served as special consultants on the broker fee issue to Eastwood’s counsel, Milford Dahl and Zack Broslavsky of Rutan & Tucker, and to Judi Partridge, former owner of Eastwood. 

If you have any questions, please contact Robert Hogeboom via e-mail or at (213) 614-7304.

Defining "What is a Group?" Under Proposition 103

Notice of California Department of Insurance Workshop

By Robert W. Hogeboom

On Monday, November 11, 2010, the California Department of Insurance (CDI) issued a Notice of Workshop Regarding Affinity Groups Under California Insurance Code Section 1861.12.

The Workshop, scheduled for Friday, December 3, 2010, in San Francisco, deals with group rating programs and the likely need for regulations defining the term “group” for eligibility under Section 1861.12, “which is a part of Proposition 103 and authorizes insurers to issue property and casualty ‘insurance coverage on a group plan.’”

Section 1861.12 does not define the term “group” and does not specify the conditions as to when insurance may be issued on a group plan.  

Barger & Wolen notes that the issue as to “what is a group?” is of major importance to insurers that have submitted group rating plans. It is likely that the CDI will issue regulations with respect to the usage of those plans, and those regulations will likely continue the present policy of ensuring that all of the coverage offered by group members be available and offered to all insureds.

The notice sets forth 13 areas that the CDI will address at the workshop and invites written comments to be submitted prior to the close of business on December 3, 2010:

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California Department of Insurance Requests Insurers to Submit Rate Decrease Application Filings

by Robert W. Hogeboom

The California Department of Insurance (CDI) Rate Regulation Division has recently issued a first round of letters to insurers requesting that they submit rate decrease applications. All Proposition 103 lines are affected. 

Because many insurers have not recently filed rate applications, the California Rate Division suspects that due to a trend of lower loss ratios, that many insurers may be charging excessive rates.

The CDI is requesting insurers to submit rate filings and advise them of the time frame to submit the filing and threatens that if the insurer does not comply, the CDI will issue an Order to Show Cause or a mandatory request for the filing.

We have questioned the CDI's authority to mandate the submission of rate application filings. 

For more information, please view the full client alert here (pdf).

Financial Services Reform Bill and the Insurance Industry

On July 15, 2010, the United States. Senate passed the Restoring American Financial Stability Act of 2010. The bill now goes to President Obama for his signature, which is expected in the coming days.

The bill, which is over 1,600 pages, establishes new regulations designed to prevent the repeat of the recent financial crisis and end the prospect of future government bailouts. Oversight is established through the creation of the Financial Stability Oversight Council (“Council”).

Members of the Council consist of the heads of several Federal financial regulatory agencies and departments (including the Treasury Secretary who is to act as the Chairman of the Council) and an independent member having insurance expertise who will be appointed by the President subject to Senate confirmation. 

Article V of the bill covers insurance and creates within the Treasury Department a new Office of National Insurance (“Office”). The Office will monitor the insurance industry, coordinate international insurance issues, and provide a study with recommendations to Congress on ways to modernize insurance regulation.        

Various duties that the Office will oversee include:

  1. Monitoring all aspects of the insurance industry and identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or U.S. financial system.
  2. Identifying entities that could become subject to regulation by the Council.
  3. Coordinating federal efforts on prudent aspects of international insurance matters.
  4. Consulting with state regulators on insurance matters of national and international importance.
  5. Advising the Secretary of Treasury on major domestic and international insurance policy issues.
  6. Providing ability to collect financial information from certain insurers (smaller insurers may be exempt).

Robert W. Hogeboom, Senior Regulatory Attorney with Barger & Wolen, along with several insurance executive members of the Pacific Association of Domestic Insurance Companies (PADIC) were escorted by staff of the National Association of Mutual Insurance Companies (NAMIC) in late June to meet with key legislators from the California House of Representatives and U.S. Senate in Washington D.C. to discuss the legislation and its effect on California insurers. 

Most important to the insurance industry is the fact that within 18 months the Office must conduct a study and issue a report to Congress providing recommendations on how to modernize and improve the system of insurance regulation in the United States.

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