Insurance Litigation Law Blog | Regulatory Law | Bad Faith | California | Lawyer | Attorney | Barger & Wolen

By Randall Doctor and Timothy J. Moroney

As we have previously reported in this blog, the CDI issued a broadly-drafted Data Call on July 9, 2009, to all insurers admitted in California seeking information on their investments in or related to Iran as a measure to enforce U.S. governmental sanctions against Iran, including restrictions with respect to doing business with companies that do business in Iran.

As a result of that Data Call, Commissioner Poizner issued a press release advising that more than 1000 insurers licensed to do business in California had agreed to a voluntary moratorium as to future investments in companies that do business in Iran (read more here). He also released a list of 296 insurers doing business in California that would not agree to the voluntary moratorium.

The press release further advised that, as of March 31, 2010, the CDI “disqualified an estimated $6 billion in holdings” in the 50 Iran-related companies (based on 2008 data). The list of the 50 “Iran-related” companies was expanded to 51 companies in April 2010.

Earlier today, Commissioner Poizner issued a press release advising that the CDI has removed four companies from the original list of the 51 “Iran-related” companies based on those companies’ decisions to end operations in Iran. The companies removed form the List are Royal Dutch Shell (Netherlands), Shell International Finance (Netherlands), Total SA (France), and Reposol YPF (Spain).

Commissioner Poizner commends these companies for “putting principle ahead of profit” and hopes the remaining 47 companies on the List follow suit.

He also notes that the CDI’s efforts, together with efforts by the United States Government, the European Union, the United Nations, and recently by the California Legislature (in connection with divestment of State assets in connection with awarding state contracts to companies with Iranian investments), are proving to "add a layer of financial pressure to the broader legal and public relations aspects of the Iran divestment effort.”

The updated CDI List of Iran-related companies is attached here.

Barger & Wolen will continue to follow the CDI’s activities on this matter.

• Email This
• Print
• Comments
• Trackbacks

Yesterday afternoon, the California Office of Administrative Law (“OAL”) issued a decision finding that a rule adopted by California Department of Insurance (“CDI”) to restrict insurers’ investment in companies that do business with Iran was an improper “underground” regulation. A copy of the OAL’s decision is found here (pdf).

As we previously reported in this blog, on July 9, 2009, the CDI issued a broadly-drafted Data Call to all insurers admitted in California seeking information on their investments in or related to Iran.

The Data Call not only sought information as to insurers’ direct investments in organizations owned or controlled directly or indirectly by the Iranian government, but also indirect investments, including investments in a company that, in turn, does business with any of the five sectors set forth in the Data Call (defense, nuclear, petroleum, natural gas or banking). The information was due by September 30, 2009. 

At the time, it was announced that California Insurance Commissioner Steve Poizner sought such information as a measure to enforce U.S. governmental sanctions against Iran, including restrictions with respect to doing business with companies that do business in Iran.

On May 13, 2010, we reported that Commissioner Steve Poizner issued a press release advising that more than 1000 insurers licensed to do business in California had agreed to a voluntary moratorium as to future investments in companies that do business in Iran. He also released a list of 296 insurers doing business in California that would not agree to the voluntary moratorium. The press release further advised that, as of March 31, 2010, the CDI “disqualified an estimated $6 billion in holdings in the 50 Iran-related companies” (based on 2008 data).

Meanwhile, on March 29, 2010, five insurance trade associations (the American Council of Life Insurers, the American Insurance Association, the Association of California Insurance Companies, the Association of California Life and Health Insurance Companies, and the Personal Insurance Federation of California) filed a petition with the OAL contending that the Commissioner’s rule on Iran investment activity constituted an impermissible “underground” regulation. “Underground” regulations are rules issued by state agencies that meet the definition of a “regulation” under Government Code section 11342.600 and are subject to the California Administrative Procedure Act (“APA”), but were not adopted pursuant to the APA process.

The OAL found that the CDI’s rule on Iranian investments was indeed a “regulation,” such that it should have been, but was not, adopted pursuant to the procedures set forth in the APA. The OAL specifically advised that it was not evaluating the advisability or wisdom of the underground regulation, nor whether the CDI possessed the authority to issue such a regulation under the proper APA procedure.

Barger & Wolen will continue to follow further developments in this matter.

For more information, please contact Larry Golub at (213) 614-7312 or (lgolub@bargewolen.com)

• Email This
• Print
• Comments
• Trackbacks

Earlier today, California Insurance Commissioner Steve Poizner issued a press release advising that more than 1000 insurers licensed to do business in California have agreed to a voluntary moratorium as to future investments in companies that do business in Iran. 

At the same time, Commissioner Poizner released a list of 296 insurers doing business in California that would not agree to the voluntary moratorium. The list of those 296 insurance companies is attached here, and the list of the 50 “Iran-related” companies, as found on the Department’s website, is also attached here.

Our blog previously reported on this issue after Commissioner Poizner first announced his Terror Financing Probe back in June 2009, and shortly thereafter issued a Data Call on July 2, 2009, to all insurers admitted in California seeking information on their investments in or related to Iran. As stated in the press release issued today:

100 percent of the 1,306 insurance companies licensed in California responded to his request to provide data on their investments with companies doing business with Iran’s, nuclear, defense, and energy sectors.

This has been a controversial issue in California over the past year, and it is unclear, now that this list of 296 has been generated, how far Commissioner Poizner, who is currently running for the Republican nomination for Governor, will pursue matters with respect to insurance companies that have refused to agree they will not make any future investments in companies that do business with Iran. 

Today’s press release provides no clue, other than to note that as of March 31, 2010, the California Department of Insurance “disqualified an estimated $6 billion in holdings in the 50 Iran-related companies” (based on 2008 data). 

Among the questions facing insurers are the following: 

• Will the Department seek to have any future investments “disallowed” as part of an insurer’s surplus? 
• Will the Department order insurers to dispose of such investments? 
• Does the Department have any legal ability to take any further action? 

Barger & Wolen will continue to follow the Commissioner's activities on this matter.

For more information, please contact Larry Golub at (213) 614-7312 (lgolub@bargerwolen.com).

• Email This
• Print
• Comments
• Trackbacks

By Robert W. Hogeboom

On July 9, 2009, the California Department of Insurance (CDI) issued a Data Call to all insurers admitted in California seeking information on their investments in or related to Iran. The information was due on September 30, 2009. 

The purpose for the Data Call is to determine if insurer investments are “sound” and comply with applicable law. The Data Call is controversial as it is broadly drafted to include not only direct investments by insurers in the government of Iran, including organizations owned or controlled directly or indirectly by the Iranian government, but also indirect investments. Indirect investments would include, for example, an investment in a company that, in turn, does business with any of the five sectors set forth in the Data Call, including defense, nuclear, petroleum, natural gas or banking. 

As recently explained by Adam Cole, General Counsel for the CDI, the Data Call was specifically introduced by Commissioner Poizner as a measure to enforce U.S. governmental sanctions against Iran, including restrictions with respect to doing business with companies that do business in Iran. 

The Commissioner’s staff will evaluate the information over the next several weeks and will likely issue a statement of the Commissioner’s intentions. The CDI may provide the information in the Data Call directly to the Treasury Department, take further action to disallow statement credit for any direct or indirect Iranian investments as being unsound investments, or request insurers to divest themselves of such investments.

For more information, contact Robert W. Hogeboom at (213) 614-7304 or rhogeboom@bargerwolen.com.

• Email This
• Print
• Comments
• Trackbacks