Law360 Publishes Hanson and Gregory Article on California Department of Insurance Approvals

Law360 has published the article “Calif. Department Of Insurance Approval Is No Silver Bullet,” written by Akin Gump litigation partner Shawn Hanson and counsel Nicholas Gregory. The article recounts a ruling by the California Supreme Court that the authors say has “special significance for young insurtech companies, which often rely on communications with the Department of Insurance when seeking to introduce new technology or business models.”

The case in question pertains to a self-storage company’s protection plan, “in which the company indemnified its customers for up to $2500 damage to stored goods.” The court held that the plan was not subject to regulation under the state’s Insurance Code and that an earlier interpretation of the California Department of Insurance, initially approving the storage company’s business model through a staff attorney opinion, carried little weight.

Hanson and Gregory write that the ruling has two important lessons. First, they say, “the informal opinion of a staff attorney is not binding and, in fact, may not be honored by the department itself when issues arise in the future. Second, even if a company receives an opinion from a department staff attorney and that opinion is later honored and adopted by the department, there is no guarantee that California courts will defer to that opinion in the event of a dispute.”

The authors conclude by suggesting that companies “be aware that such informal interactions are not a silver bullet against regulatory risk down the road.” As a result, they should ensure they are appropriately evaluating that risk as they move forward.

The article, which originated as an Akin Gump client alert, can be read by clicking here.