Consumer groups can now ask for compensation for legal fees from auto insurance companies if they were able to successfully lobby against rate increase requests or proposals, ruled a state appeals court.
The Second District Court of Appeals of Los Angeles deliberated on the provisions of a 1988 initiative on reimbursements, and decided that all proceedings from beginning to end would have to be shouldered by insurers in cases where they lose out on their bid. The author of this measure, Harvey Rosenfield, and also founder of the group, Consumer Watchdog, hailed the court decision and claimed that it was a victory for consumers who would now be encouraged and inspired to pursue legal actions against auto insurers planning to hike premium rates. Rosenfield wrote this initiative to prevent insurance companies from raising rates at will. He felt that insurers before believed that consumers were not that motivated to go up against business juggernauts, making it easy for big insurance companies to hike fees.
With this measure and court decision in place, insurers would now be more careful in attempting to jack up rates, since they would have to pay for legal fees even if they decided to drop their proposal or agree to a settlement.
Under Rosenfield’s measure, insurance commissioners are in charge of regulating premium rates of auto insurance companies. In cases where insurers apply for a rate increase, consumer advocate groups are allowed to participate in the deliberations and can be awarded compensation for their expenses should the results turn out favourable on their part.
This recent decision of the appeals court addressed the habitual practice of insurance companies filing for fee hikes and then withdrawing once they start receiving criticisms or objections.
This case started from a 2005 court decision exempting insurers from paying legal fees to consumer groups should the former decide to withdraw their proposal or seek settlement. In 2006, the court upgraded coverage to all legal proceedings during the deliberation to encourage the parties to seek settlement. The new rules were upheld the following year by presiding commissioner at that time, Steve Poizner.
The insurance industry however balked at this new measure and sought for legal relief. They argued that this measure should just cover case proceedings and not ones that ended in settlements or private negotiations. In the ensuing court case, the judge ruled in favour of the new measures and junked arguments of the insurance companies. As a consequence, prosecution was ordered by the court to pay the defendants, Consumer Watchdog $122,000 in legal fees.