State Farm Loses California Appeal

An appeals court has ruled that State Farm can’t block the release of information about where it sells insurance in California, a decision hailed by open records advocates and critics who have accused the giant insurer of redlining.

The state Court of Appeal in San Francisco ruled Wednesday that California insurance regulators acted appropriately two years ago in giving the State Farm data to consumer advocates who then made the information public.

The activists said the ZIP Code-based data, which detailed the placement of State Farm agents around the state, proved that the insurer failed to adequately serve poor and minority communities--a contention State Farm denies.

Consumer advocates said access to the records could help communities target insurers engaged in redlining, the illegal practice of refusing to sell insurance in low-income or ethnic communities.

“This is a public access issue, writ large,” said Mark Savage, managing attorney for Public Advocates, the legal firm representing Consumers Union and Southern Christian Leadership Conference.

State Farm said it has not yet decided whether to appeal.

“We were surprised and very disappointed by the decision,” said State Farm spokesman Bill Sirola. “What we’re attempting to do is protect the confidentiality [of policyholders’ records].”

Although the data did not include details about individual policyholders, Sirola said releasing such data could lead to activists’ demands for more private data.

The appeals court judges said that even if the data were a trade secret, as State Farm contends, their release wouldn’t have been prohibited under California law.

“We conclude that, on balance, the public is better served by disclosure of State Farm’s ... data than by nondisclosure,” the court wrote in its opinion.

State regulators said the information was clearly not protected and should be made available.

“The argument that this information is a trade secret is simply wrong and erroneous as a matter of law,” said Steven Green, the state Insurance Department’s chief counsel.

The department requires insurers to file annual reports detailing how many policies and agents they have in every ZIP Code.

Several other insurers, including Allstate and Farmers, have challenged the regulations in court, and their lawsuit is still pending. State Farm filed suit because its information was released in 1999 to former Texas insurance commissioner David “Birny” Birnbaum.

Last year, the San Francisco Superior Court ruled against State Farm. The appeals court upheld the lower court’s ruling, saying that State Farm’s desire to keep the information secret did not outweigh the public’s right to know.

Quoting from an earlier case that involved public records, the court said trade secrets are protected under the Public Records Act only when such protection “would not tend to conceal fraud or otherwise work injustice.”

Consumer advocates won’t have access to insurers’ data yet, however. A stay preventing the release of the information will remain in effect while State Farm decides whether to appeal.