State insurance commissioner accepted contributions and intervened in cases affecting donor, records show

California Insurance Commissioner Ricardo Lara’s office intervened in at least four proceedings involving a company with ties to insurance executives and their spouses who donated tens of thousands of dollars to his re-election campaign, records show.

Lara, who was elected in November after promising not to accept campaign contributions from people he regulates, last month overruled two decisions by Department of Insurance judges and ordered the reopening of cases which involved Applied Underwriters.

His office issued two stay orders last month in other cases that challenged the cost of workers’ compensation policies sold by Applied Underwriters and its subsidiary, California Insurance Co., according to documents.

The state insurance commissioner did not respond to questions about why he overruled the administrative law judge or why his office issued the stay orders.

Department spokesman Michael Soller issued a statement that addressed one of the four instances.

Soller said that Deputy Commissioner Bryant Henley stayed a judge’s order that Applied Underwriters reimburse policyholder Oceanside Laundry LLC.

“I can’t address all your questions since some are campaign-related,” Soller wrote in an email. “But on this case, the commissioner was not involved in this decision nor will he be involved in any decision regarding this company going forward.”

Soller added that Lara will stay out of a looming decision related to a pending sale of Applied Underwriters. The company is being sold by majority owner Berkshire Hathaway, a transaction that requires approval by the California insurance commissioner.

Neither Applied Underwriters, based in Nebraska, nor its lawyers responded to requests for comment.

Two weeks ago, The San Diego Union-Tribune reported that Applied Underwriters executive Stephen Acunto and his wife each donated $15,500 to the newly created Lara For Insurance Commissioner 2022 campaign committee in April.

Theresa DeBarbrie, the wife of an insurance executive who markets Applied Underwriters products and conducts other business in California, also contributed $15,500 in April, shortly before Lara declined to adopt the judges’ orders, campaign disclosures show.

None of the donors responded to questions about their contributions.

Hours after the Union-Tribune report was published, Lara issued a statement saying he would return the money — and hire a treasurer for his reelection campaign rather than continue to perform those duties himself.

“I appreciate The San Diego Union-Tribune bringing this to my attention,” the statement said.

Four days after Lara publicly pledged to return the contributions, his office issued an amended order in a case against Applied Underwriters. That amended order reversed a judge’s decision that the insurer must reimburse excessive fees paid by policyholder Oceanside Laundry LLC.

“Respondents shall recalculate Appellant’s premium owed for the policy periods at issue in this appeal, using the filed rates for Appellant’s guaranteed cost policies,” the judge’s July 11 order said.

The Oceanside Laundry case was one of two disputes in which Lara’s office issued stay orders last month.

Last Thursday a judge in a dispute between fuel-delivery company Van De Pol Enterprises and Applied Underwriters rejected Lara’s order to reopen that proceeding. He filed a 5-page response telling his boss he would re-submit his original ruling.

“None of the issues on which the June 2019 order directs the (judge) to take additional evidence are questions of fact,” Administrative Law Judge Clarke de Maigret wrote. “The commissioner or his designee must refer to legal authority if they believe the proposed decision insufficiently addresses those issues.”

Lara’s intervention in the four cases involving Allied Underwriters raises questions about whether the political contributions influenced his decisions, critics said.

Jerry Flanagan is an attorney with the advocacy group Consumer Watchdog, the Los Angeles nonprofit that sponsored the 1988 initiative that established the independent state insurance commissioner.

He questioned the actions taken by Lara — a longtime Democratic state lawmaker prior to his November election to statewide office and a graduate of San Diego State University.

“It’s extraordinary for a commissioner to step in on the side of a donor to overrule a judge and the judge says ‘pound sand,’” Flanagan said.

Carmel attorney Larry Lichtenegger represents Oceanside Laundry, Van De Pol Enterprises and dozens of other companies that he said bought workers’ compensation plans from Applied Underwriters. He said his clients suspect Lara was influenced by the campaign donations.

“They are upset, as they should be,” Lichtenegger said. “As I am, and I should be. I never saw the former commissioner do anything like this.”

California’s elected insurance commissioner oversees the largest insurance market in the nation, some $310 billion worth of annual policies that cover everything from homes and businesses to real estate and employees.

Applied Underwriters specializes in a specific workers’ compensation insurance product it marketed to thousands of small and medium-sized California businesses as EquityComp, which offered coverage for on-the-job injuries at a lower rate than conventional insurers.

The policies were “loss-sensitive,” meaning the premiums were based on the cost of treating injured workers. Such policies are sold mostly to large employers, who are better able to control claims through internal business practices.

Most small business owners choose what are called guaranteed-cost policies that present a flat rate for workers’ compensation insurance coverage.

Applied Underwriters is the subject of dozens of complaints pending in various state courts and before the Administrative Hearing Bureau, the state Department of Insurance division that adjudicates disputes between insurers and their policyholders.

The insurer also has received scrutiny from regulators from California to New York.

Three years ago, then-Insurance Commissioner Dave Jones issued a decision that found the Applied Underwriters policies illegal because they did not comply with California regulations.

“The evidence showed that California Insurance Company filed one set of rates and policies, sold it to a California business, and then had one of its affiliates sell the same business an insurance policy with another set of rates and terms which had not been filed with the department,” Jones said in a 2016 press release.

Applied Underwriters apparently stopped selling its patented EquityComp product in California after the 2016 decision. But many of the policies it sold were multi-year agreements, and disputes over premiums are still being litigated.

Thursday, the same day one of the judges rebuffed Lara’s direction to reopen a case against Applied Underwriters, the top New York state insurance regulator announced a $3 million penalty against Applied Underwriters.

New York “is committed to protecting all consumers, including our small business owners, and today we are holding Applied Underwriters responsible for illegally operating outside of the department’s oversight,” the regulator said in a news release.

Applied Underwriters in a statement expressed “general satisfaction” with the outcome of the investigation and admitted no wrongdoing.

“We are a highly innovative company, known for our creative approaches to solving the needs of clients,” Applied Underwriters general counsel Jeffrey Silver said.

Lara and his campaign did not respond to Union-Tribune requests for an update on whether Lara returned political donations he said he would give back. So far there is no record of it with state elections officials.

It also is not clear whether the commissioner has hired a campaign treasurer, whose job would include vetting donors to avoid conflicts of interest.