NAII Encourages Calif. Supreme Court to Protect Insurers’ Competitive Edge

November 19, 2001

Two conflicting California appellate court decisions have insurers questioning whether the community service statements they must file are subject to public disclosure rules under the California Public Records Act.

At issue is the Department of Insurance’s ability to publicly release data on the premiums an insurer has written in a given neighborhood. Based on a ruling this month in Farmers Insurance Exchange v. Low by the California Court of Appeals in Fresno and an opposite ruling in State Farm v. Low by the California Court of Appeals in San Francisco, the issue is likely to be decided by the state Supreme Court.

“It seems appropriate that this Public Records Act issue should be heard by the California Supreme Court in light of the contradictory appellate court decisions,” commented Sam Sorich, vice president and western regional manager of the National Association of Independent Insurers (NAII). “If the California Supreme Court takes up the issue, it could hand down an important decision on the scope of protection that California gives to insurers’ trade secrets.”

California insurers are required to annually file “Community Service Statements,” which divulge an insurer’s total earned exposures and premiums, cancellations and non-renewals by ZIP code, as well as reveal the location of insurer and agent offices and certain demographic information about insurance applicants.

In Farmers Insurance Exchange v. Low, Farmers argued that the data in its statements was proprietary information and that competitors with access to the data in the statements could use the information to develop competing marketing strategies. The 5th District California Court of Appeals in Fresno ruled that information that insurers file in Community Service Statements might be trade secrets exempt from public disclosure under the California Public Records Act, Sorich said.

The case was sent back to the trial court for further review.

“The protection of insurer data preserves a competitive business environment in California,” Sorich said. ” The release of such data could hurt an insurance company’s competitive edge.”

But the 1st District California Court of Appeals in San Francisco delivered an opposing ruling in mid-October in State Farm vs. Low. Like Farmers, State Farm challenged the Department of Insurance’s disclosure of Community Service Statements because of the company’s concerns about the exposure of trade secrets. But the justices disagreed, declaring that the public should have full disclosure of all information in the community service statements, including where insurers are selling policies.

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