Industry Groups Sue California Department Over Underground DI Regulations

Additionally, the groups said, "California consumers would have fewer disability insurance products available and less protection from disabling injuries and illnesses," citing the study.

In filing the suit, Brad Wenger, president of the Association of California Life and Health Insurance Companies, said, "Fewer Californians will be able to protect themselves from financial ruin if Commissioner Garamendi's requirements go forward.

"Left unchallenged, the commissioner's actions would drive the cost of disability insurance beyond the reach of many employers who provide this benefit to their employees," Wenger added. "As a result, more Californians would be forced to rely on government programs to support themselves and their families if they are unable to work because of a disabling condition."

Gary Cohen, the department's chief counsel, met with representatives of the life and health industry before the suit was filed to discuss the department's actions and other issues relating to disability.

The commissioner, Cohen maintained, is within his power to withdraw approval of a policy, and the actions are part of an effort to level the playing field between companies entering California's disability market and those whose policies were approved as much as 20 years ago, before many of the current restrictions were enacted.

"If somebody wanted to come into California now, as a new disability insurer, they would be at a significant disadvantage," Cohen said.

Additionally, he noted that the approval withdrawal process includes an appeal mechanism through which companies could challenge the commissioner's decision, which he said gave insurance companies the due process protections normally provided by the formal rulemaking process.

Wenger said in his statement that the insurance industry supports fair regulations that would protect consumers and is willing to work with state regulators but was unwilling to allow the department to, in the industry's view, circumvent the required procedures for rulemaking.

"The decision to file this complaint against the department was an action of last resort," he said. "While insurers wish to work with the department, we felt it necessary to object to the manner in which they are proceeding and the costly rules which they are pursuing."