On Friday, December 12, 2008, the California Department of Insurance (“CDI”) held its pre-notice public discussions on contemplated revisions to the prior approval rate regulations. The CDI panel that presided over the discussions consisted of Adam Cole (General Counsel), William Gausewitz (Special Counsel to the Commissioner), Jesse Huff (Special Assistant to the Commissioner), and Bryant Henley (Senior Staff Counsel).

At the outset, Gausewitz made clear that the contemplated revisions to the prior approval regulations were not being formally proposed and that this workshop was just an opportunity to get preliminary thoughts from interested parties. Gausewitz also noted that there was no formal agenda. He noted that there were a number of individuals who identified themselves as those wished to speak, but he reminded that anyone who had a comment was encouraged to speak.

The first person invited to speak was Harvey Rosenfield of Consumer Watchdog. Rosenfield initially gave an overview of his view of why Proposition 103 was approved by the California electorate and noted that Proposition 103 resulted in the savings of hundreds of millions of dollars for California consumers, particularly through the prior approval regulations in effect prior to 2007 (which Rosenfield referred to as the “Garamendi” regulations).

Rosenfield noted that the newly contemplated revisions to the prior approval regulations undermined the “Garamendi” regulations in that it would allow insurers to “game the system” and obtain excessive profits. Rosenfield also described the newly suggested revisions to be illegal, “poorly vetted,” “poorly crafted,” and “half-baked” and noted that none were pro-consumer. He believed that these newly revised regulations constituted a “wholesale deregulation” of the industry.

Cole asked Rosenfield to specifically identify what provisions he considered illegal and why. In response, Rosenfield identified those regulations that permitted the “phasing” in of rate changes that are greater than 15% (i.e., proposed Section 2644.29) and the expedited