In suing the California Insurance Commissioner on July 10, 2014, PacifiCare Life Insurance Company sought a writ of mandamus ordering the Commissioner to set aside his Decision and Order imposing a record $173 million penalty on PacifiCare (the Order). The Commissioner’s Order followed a three-year evidentiary hearing after which the administrative law judge recommended that PacifiCare be assessed a substantially smaller penalty of $11 million.
The Order stemmed from a targeted market conduct examination of PacifiCare’s claims handling practices that was allegedly initiated in response to the increase in complaints received by the Department following the 2005 merger of PacifiCare and UnitedHealth. The California Department of Insurance (CDI) contended that PacifiCare’s push for savings following the merger resulted in a total breakdown in customer service and claims administration.
PacifiCare’s suit asserted that the Commissioner and the CDI misinterpreted the Unfair Insurance Practices Act and the Fair Claims Settlement Practice Regulations. PacifiCare contested the Commissioner’s assertions that:
The interpretations in the Commissioner’s Order set forth the means by which the CDI may assess greater penalties for violations found in market conduct exams for any insurer in California.