CBS MarketWatch is reporting: “California starts probing insurers: Spitzer suit spawns other investigations across U.S.” Excerpt:
California Attorney General Bill Lockyer has started an investigation into alleged bid rigging by insurance firms and brokers, the latest sign that Eliot Spitzer’s probe of the industry is spreading from New York to other states. Lockyer’s investigation, announced late Friday, will focus on possible violations of California’s antitrust law, known as the Cartwright Act, as well as potential fraud by companies.
According to the article, Lockyer said in a statement that “[a]ny insurance company or broker violating these laws will be held accountable.” (Previous post here on the benefits implications of the probes.)
Also, in October of this year, California issued proposed regulations setting forth the fiduciary duties owed to a client by brokers. For more information, read the Public Notice, the Initial Statement of Reasons for the regulations, and the text of the proposed regulations. A portion of the regulations provide as follows:
2184.4 Fiduciary duty(a) A broker who places his or her own financial or other interest above that of his or her client violates Insurance Code section 790.02.
(b) A broker violates Insurance Code section 790.02 if, with either new or renewal business, he or she: (1) Fails to provide the client with the proposal of a best available insurer; (2) Advises a client to select an insurer other than a best available insurer; (3) Advises a client not to select a best available insurer from among multiple insurers suggested to the client; (4) Fails to take reasonable measures to obtain a quote from an insurer that might be a best available insurer.
According to this press release, “failure to comply could result in fines of up to $10,000 per incident, issuance of a cease and desist order by the Commissioner, and/or the revocation or suspension of a company or broker’s license.”
(How this law would interact with ERISA with respect to brokers who are fiduciaries under ERISA is a good topic for future discussion.)
In addition, on Tuesday California voters rejected the proposed law requiring businesses to provide health insurance for their workers or to pay into a state health coverage fund: “Mandatory health insurance loses narrowly.” (Previous posts on SB2 here.) If voters had not rejected it, many had predicted that there would have been legal challenges to the legislation under ERISA.
Finally, here’s a good article from Trucker Huss on another interesting development in California: “Discretionary Clauses in Disability Insurance Policies Ruled Illegal in California.” (From Benefitslink.com) According to the article, “[t]he California Department of Insurance and a federal district court have both recently held that the use of so called “discretionary clauses” in disability insurance policies, including those issued to plans governed by ERISA, violates California law and that the state law in this regard is not preempted by ERISA.”
(There’s never a dull moment in California!)