Under proposed California Department of Insurance (CDI) regulations, the commissioner could make far-reaching financial decisions for insurers under a broad range of conditions deemed hazardous, including adverse findings in market conduct exam reports.
California conducts three types of market conduct exams: financial exams; claims activity and lastly, rating and underwriting.
The adverse findings can be reported in financial condition and market conduct examination reports, audit reports, actuarial opinions, reports or summaries, according to the proposed regulation.
“This would include both rating and claims examinations. This suggests that the CDI is attempting to bring market conduct examinations within the framework of ‘hazardous financial condition,’” wrote Robert Hogeboom of Barger & Wolen LLP in Los Angeles in a recent blog entry.
On Aug. 7 in Sacramento there will be a hearing on the proposed regulations and Hogeboom will testify against them on the grounds that the CDI is going beyond its statutory authority with “extremely broad regulations” that allow for no due process, he says.
There is no administrative hearing process to resolve disputes involving the commissioner’s corrective action orders, Hogeboom has argued. The insurer has the opportunity to be heard by requesting a meeting with the Commissioner. Thereafter, the only redress for the insurer is to seek a judicial challenge, Hogeboom writes.