Public Right to Know Trumps Insurers' Alleged Trade Secret
Santa Monica, CA -- Consumer advocates applauded a ruling by the California Supreme Court today upholding voter-approved Proposition 103's requirement that insurance companies fully disclose premium and other related information to the public. The Court upheld the insurance commissioner's regulations requiring insurers to disclose premium-related information and certain details of their business practices, including the number of agents located in a ZIP Code and volume of sales by ZIP Code. Under Prop 103, insurers are not allowed to base auto insurance rates primarily on ZIP Code; Commissioner Garamendi is currently developing new rules to enforce that provision of the law.
The data have been collected as part of a California Department of Insurance effort to track the insurance industry for indications of geographic discrimination, often known as redlining. The insurers argued unsuccessfully that the data represented trade secret information. The case is State Farm v. Garamendi [S102251]. Read the decision here: http://www.consumerwatchdog.org/insurance/rp/rp004212.pdf
"Once again insurance companies have sued to block Proposition 103 and once again the insurers have been rebuffed by the Court," said Harvey Rosenfield, the author of Proposition 103, which was approved by voters in 1988. "The Court appropriately elevated the voter's will and the public's right to know over the insurance industry's desire for secrecy."
According to the Court, "[T]he drafters [of Prop. 103] sought to 'enable consumers to permanently unite to fight against insurance abuse . . . .' By giving the public access to all information provided to the Commissioner pursuant to article 10--which was enacted by Proposition 103--our construction of Insurance Code section 1861.07 is wholly consistent with Proposition 103's goal of fostering consumer participation in the rate-setting process."
The case, argued by Public Advocates, representing intervenors Consumers Union and Southern Christian Leadership Conference of Greater Los Angeles, brings to a close a five-year battle set off when State Farm challenged the right of low-income advocates to review data concerning the insurers' practices in poor communities. The Foundation for Taxpayer and Consumer Rights (FTCR) filed a "friend of the court" brief in support of the consumer groups and the Insurance Commissioner stressing the uniquely broad public disclosure right applicable to insurance industry data enacted by the voters under Prop 103.
Proposition 103 calls for all information submitted by insurers to the Insurance Commissioner to be available for public inspection. Agreeing with intervenors and FTCR, the Court decided that because of Prop 103's strong and clear disclosure rules regarding insurance company information, the trade secret exemption in California's Public Records Act does not apply. Data, such as the office locations and sales volume in poor communities can be crucial to identifying patterns of discrimination. Insurance companies have argued that this information should be withheld from the public. In ruling in favor of disclosure, the Supreme Court determined that the voters' decision to make insurer information public through Proposition 103 must be enforced.
"Proposition 103 provides the public with more information about insurance company practices and more tools to block discrimination and unfair rates," said Douglas Heller, Executive Director of FTCR. "The Court has ruled to keep the discrimination data public, now the Commissioner should write rules that stop the discrimination by ending the industry's practice of basing insurance rates on ZIP Code rather than driving record."