Lockyer Launches Formal Investigation Into Business Practices of Insurance Industry
Attorney General Bill Lockyer (D) on Friday launched a formal investigation into potential "bid rigging, price fixing and other possible antitrust violations" by the insurance industry, the Sacramento Bee reports (Kasler, Sacramento Bee, 10/30). Lockyer's action comes after Insurance Commissioner John Garamendi (D) last month announced new regulations that would require insurance agents and brokers to reveal all financial incentives received from insurers and to find the "best available" policies for clients.
Garamendi made the announcement as an investigation into the business practices of the insurance industry -- launched by New York Attorney General Eliot Spitzer (D) -- expanded nationwide.
Garamendi also planned to hire San Diego-based class-action law firm Lerach Coughlin Stoia Geller Rudman & Robbins LLP to lead legal action against insurance brokers and carriers on behalf of clients who have not received what they deem the best prices and terms. Lockyer gave Garamendi permission to hire the private law firm to help the insurance department prosecute insurance code violations.
Garamendi has said that he wants to take legal action against insurance brokers and companies under the state's Unfair Competition Law, but Lockyer told Garamendi that only the attorney general can take legal action under that law on behalf of the state of California (California Healthline, 10/21).
Lockyer said he was cooperating with Garamendi in the investigation into the industry but added that his staff is more closely focusing on actions that are clear violations of the law.
Lockyer said that his initial inquiry would seek to determine whether insurers and insurance brokers violated state antitrust laws by conspiring to fix prices, a violation that would carry both civil and criminal penalties, according to the Los Angeles Times.
"Businesses cannot conspire to give themselves an unfair advantage over competitors or harm consumers by keeping prices artificially inflated," Lockyer said, adding, "They cannot breach their duty to tell customers the whole truth" (Lifsher/Reckard, Los Angeles Times, 10/30).
Lockyer spokesperson Tim Dresslar said it is "premature to name specific targets" of the attorney general's investigation but added that Lockyer's staff would not have launched the probe without "some idea of where to start looking" (Sacramento Bee, 10/30).
Stephen Young, general counsel for the Insurance Brokers and Agents of the West, said he welcomed Lockyer's investigation but added that the "serious allegations" made by Spitzer in his probe of insurers and insurance brokers in New York "will prove to be completely isolated and limited" (Los Angeles Times, 10/30).