Last week we learned that soon after being elected to State Insurance Commissioner, Ricardo Lara, a former Democrat State Senator and Assemblyman, organized a reelection committee that began accepting tens of thousands of dollars in political contributions from people with ties to companies he regulates, campaign disclosures show, the San Diego Union Tribune reported. The UT noted the contributions are questionable because state regulators are not supposed to accept donations from people and business before the agency. Previous insurance commissioners historically have declined to accept political donations from interested parties.
Dale Debber who publishes the Workers’ Comp Executive news website, now reports, “The evidence in the timeline of events strongly suggests that he took official actions – by changing or staying administrative law judges’ decisions to Applied’s benefit – after receiving Applied Underwriters money.”
Correlation may or may not equal causation, but the proximity of his direct favorable actions in legal cases before the Department of Insurance raise the issue. What’s at stake is far more subtle and farther under the radar than the approval of the sale of Applied Underwriters’ and its affiliates, or the approval of rate filings for wildfire, or cannabis cultivation coverage, all of which are on Lara’s desk. It is about dozens of cases, a precedent, and hundreds of millions of dollars that Applied wants from California employers who may not owe it or who may be due refunds.
Because of Lara’s actions, clouds of corruption are now cast over the decision-making process of the Department’s Administrative Hearing Bureau– not the individual administrative law judges.
The Commissioner, by virtue of his office, sits in a judicial capacity. In these cases, involving Applied Underwriters’, not only did he have a financial relationship to one of the parties in the litigation, prior to making decisions, but he took official actions in the cases.
Debber and his team examined multiple legal actions before the Department’s Administrative Law Judges. “We cover these kinds of cases, especially those involving Applied Underwriters regularly. What we found is outlined in the timeline. It is the story of specific decisions by Administrative Law Judges – which may ultimately affect those hundreds of millions of dollars – being stayed on the Commissioner’s own initiative, and later not adopted.”
This is significant because the California Department of Insurance regulates more than $310 billion in annual policies for homeowners, drivers, employers and other groups of consumers. California is the largest insurance market in the United States and the fourth largest insurance market in the world, making the California Insurance Commissioner very powerful.
There have been tons of cases filed by employers against Applied Underwriters’ in all levels of state and federal courts around the country. They have one thing in common, and that is a fight over the amount of money Applied Underwriters’ asserts it is owed, or by Applied Underwriters’ back to the employers. It’s over what Applied sold as a loss sensitive program called EquityComp – using a contract known as the Reinsurance Participation Agreement, the RPA. The RPA has been determined to be void and unenforceable by multiple courts in multiple jurisdictions including by the previous California Insurance Commissioner.
After Lara took these donations, two decisions were stayed by the Commissioner, one at the sole recommendation of Lara.
Debber’s article explains in great detail who, what, when, where, why and how the donations and decisions took place, and details this in a timeline, as only a Workers’ Comp expert can.
However, many Californians want to know what could and should happen in this high profile case of an elected official to one of the states highest offices.
Former State Insurance Commissioner (1995-2000) Chuck Quackenbush, a Republican, left the office after accusations of favoring insurance companies. Following the 1994 Northridge earthquake, Quackenbush was accused of allowing insurance companies to compensate their clients less than the actual damages. In exchange, the insurance companies set up special “educational funds.”
An 18-month investigation conducted by federal, state and Sacramento County prosecutors ended with prosecutors declining to press charges against Quackenbush, as they felt the evidence was not strong enough.
Read all of Debber’s “Lara Took Money Before Favorable Actions in Applied Cases” at Workers’ Comp Executive for the timeline and more industry detail.