Reinsurance Focus

In response to the determination by the Office of Administrative Law (“the Office”) that the California Insurance Department’s “request” for a “moratorium” on investments in Iran’s energy industry (see our November 4 post), the Insurance Commissioner has sued the Office in a Petition for Writ of Mandate. While most insurance companies had complied with the request, which practically amounts to a divestiture requirement, several trade associations challenged it as an “underground regulation,” and those trade associations were named in the Commissioner’s lawsuit. Commissioner Poizner, who is about to leave office, ‘retained” Attorney General (and soon to be Governor) Brown to represent it against the small 20 employee Office. The Director of the Office has written to the Deputy Attorney General who signed the Petition pointing out that there is a conflict of interest because Attorney General Brown is representing the Office in other “underground regulation” cases, stating that the Office declines to waive the conflict. The letter invites an exchange of legal authorities and discussion of the issue, concluding with “[n]o matter what agency is involved and no matter what praiseworthy objective the agency has in mind, nevertheless, the law calls for the proper procedure to be utilized.” The Petition contends that the directive is a valid implementation of the Commissioner’s authority to regulate insurance company investments due to the political, economic and reputational risk that companies take on in such investments, and that “[t]he action taken by the Commissioner is similar to statutes passed by the California legislature and Congress to force companies to divest in Iranian companies.” How the Commissioner may take action similar to legislative action without the benefit of the rulemaking process is not alleged. The Office found out that it was about to be sued by the receipt of a request from the Deputy Attorney General for the Office’s administrative record in the determination matter. So much for inter-departmental courtesies. The position of the incoming Commissioner and Attorney General with respect to this issue is unknown. Insurance Commissioner Steve Poizner v. Office of Administrative Law, et al., Cal. Super. Ct.

This post written by Rollie Goss.