Here is roughly how home insurance rates get set in California. An insurer that wants to charge homeowners more files a request with the state Department of Insurance. Ratepayers or advocacy groups such as Consumer Watchdog can step in as “intervenors” to object, and under California law they can get paid for doing it. The department’s legal branch reviews the request. The commissioner has the final say, sometimes after the department’s judicial branch, its administrative law judges, has weighed in. The department’s website describes that branch as a “neutral forum for conducting fair and independent evidentiary hearings and mediations.”
If you think that sounds like a single agency holding the roles of advocate, judge and final decider, you’re right, and the setup only works if the walls between those roles stay up. Dave Jones, who was insurance commissioner before Ricardo Lara, put it this way: “The way it’s supposed to work is that the commissioner gets walled off from the rest of the department when there is a hearing in a matter where the commissioner is the ultimate decider, by law.”
Now the department’s former chief administrative law judge says those walls didn’t hold. Kristin Rosi, who was fired last year, filed suit in Alameda County Superior Court in late September against Lara and Lucy Wang, his former special counsel and a deputy insurance commissioner, as Levi Sumagaysay reported for CalMatters. The suit accuses them of illegally approving rate increases and undermining the department’s judicial branch. It alleges that Wang and other top officials retaliated against Rosi because she called out their practices and would not follow orders to revoke or change her rulings.
The central allegation is about settlements:
The judges observed that the underlying rate processes included settlement agreements for unprecedented rate increases, and it was relatively apparent that the Department was using prior rate approval procedures that are neither codified by insurance law, nor found in the regulations.
Translated: an insurer asks for a big increase, the department and the other parties negotiate a number, and the number gets approved. The judges’ complaint is about everything around the number. The suit alleges the process for getting there doesn’t appear in the insurance law or in the regulations. At one point, according to the suit, Lara emailed Rosi asking her to “get on board” with a department plan setting out what the judges could and couldn’t oversee, including “instruction to review settlements in rate proceedings only when a notice of hearing has (been) issued.” So the judges would review a settlement only if a hearing had been noticed. On Rosi’s account, that left the judges with whatever jurisdiction the department chose to give them, case by case.
Rosi also filed State Bar complaints last year against four department people, including Wang. Those cases are pending and not public, but CalMatters obtained copies. They say Wang, and in at least one case Lara, met with the department’s legal team about rate cases that team was handling, without the other stakeholders present. Notably, that includes the insurers as well as the intervenors. It’s the administrative version of a judge meeting privately with one side of a lawsuit. The other side’s absence is the whole problem.
A showdown, then a vacancy
The fight dates to late 2024. In October that year, while approving Consumer Watchdog’s requests for compensation, Rosi wrote in her ruling that the department was approving rate requests without following the law. According to the suit, Wang and others then began stripping power from the administrative law judges. In December, E&E News reported that Lara had ordered on Dec. 9 that a hearing not go forward and that Rosi held it anyway, taking Consumer Watchdog’s objections to Lara’s attempts to intervene in the proceedings. “It’s a classic showdown between a regulator and a judge,” Consumer Watchdog president Jamie Court said then.
The regulator won that one, at least for now. The department has one administrative law judge left. In an August ruling, that judge alluded to a judicial branch that was understaffed and underresourced.
“When Judge Rosi was making rulings consistent with the law she was informed improperly that she ought to rule certain ways, and that she ought not to hold hearings,” said Wendy Musell, Rosi’s lawyer, who said Rosi would not give interviews. Department spokesperson Gabriel Sanchez didn’t answer CalMatters’ questions or its request to interview Lara. “We have no comment,” he wrote. Wang said she was “sued in my official capacity as Special Counsel and am being represented by the (attorney general’s) office, so I can’t comment on the present litigation.” She now works at a San Francisco law firm, where she represents insurance companies. Attorney General Rob Bonta’s office, asked about representing Lara and Wang, deferred to the Insurance Department. So the department’s lawyer refers questions to the department, and the department has no comment.
Rosi joined the department as an administrative law judge in 2007 and became chief in 2016, appointed by Jones, who called her allegations “shocking and disturbing.” Harvey Rosenfield, Consumer Watchdog’s founder, called them “really dirty and scandalous” and said Californians need to know that “people who engage in this conduct will be held accountable.” Robert Herrell, executive director of the Consumer Federation of California and a deputy commissioner under Jones, said he knew Rosi as smart, serious and well-respected. “An (administrative law judge) calls balls and strikes… they wanted the (insurance) industry to win almost all the time,” he said. “Too bad it took this long for some of this stuff to come out.”
For context, the suit arrives as Lara’s eight years in office wind down. His tenure has drawn criticism over insurance-industry donations and decisions that allegedly benefited those donors, over his overseas travel, and over major wildfires that hurt both the availability and the affordability of coverage. Bankrate.com says Californians’ home insurance premiums are up 23% since 2023, which turns a fight about procedure into one about real money. Fire survivors have also been fighting in Sacramento over claims rules.
Next commissioner
Jane Kim declared victory in the insurance commissioner race last week and takes office in January. She has criticized the price increases that came with Lara’s industry-friendly rules, the San Francisco Chronicle reported. Jones and Herrell both said she should make clear from the start that the department follows the rule of law. “Jane Kim as soon as she’s sworn in ought to initiate an investigation of these allegations and not wait for a superior court to make a decision,” Jones said. Through a spokesperson, Kim said: “While I can’t comment on pending litigation against the Department, I am committed to transparency and accountability — in rate decisions, and in general.” She said she plans to investigate the claims as soon as she takes office.
The first case management conference in Rosi’s suit is set for Feb. 16. If Kim wants a fair and independent evidentiary hearing on any of this inside her own department, she will have one judge available to hold it.