State Farm Mut. Auto. Ins. Co. v. Garamendi, No. S102251.

• Court: United States State Supreme Court (California)
• Writing for the Court: BROWN, J.
• Citation: 12 Cal.Rptr.3d 343,32 Cal.4th 1029,88 P.3d 71
• Decision Date: 26 April 2004
• Docket Number: No. S102251.
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al., Plaintiffs and Appellants, v. John GARAMENDI, as Insurance Commissioner, etc., et al., Defendants and Respondents; Southern Christian Leadership Conference of Greater Los Angeles, Inc., et al., Interveners and Respondents.

12 Cal.Rptr.3d 343
88 P.3d 71
32 Cal.4th 1029

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al., Plaintiffs and Appellants,
v.
John GARAMENDI, as Insurance Commissioner, etc., et al., Defendants and Respondents;
Southern Christian Leadership Conference of Greater Los Angeles, Inc., et al., Interveners and Respondents

No. S102251.

Supreme Court of California.

April 26, 2004.

As Modified June 9, 2004.

12 Cal.Rptr.3d 345

Heller Ehrman White & McAuliffe, Paul Alexander, Vanessa Wells and Victoria Collman Brown, Menlo Park, for Plaintiffs and Appellants

LeBoeuf, Lamb, Greene & MacRae, Sonnenschein Nath & Rosenthal, Thomas E. McDonald and Sanford Kingsley, San Francisco, for Allstate Insurance Company, Allstate Indemnity Company, Deerbrook Insurance Company, United Services Automobile Association and USAA Casualty Insurance Company as Amici Curiae on behalf of Plaintiffs and Appellants.

Paul, Hastings, Janofsky & Walker, Roger M. Milgrim, George L. Graff, New York, NY, Romy Berk, Thomas J. Finn, Brian Moran, New York, NY, Paul W. Cane, Jr., San Francisco; National Chamber Litigation Center and Robin S. Conrad, Washington, DC, for California Chamber of Commerce, Chamber of Commerce of the United States, the California Business Roundtable, California Healthcare Institute and the Pharmaceutical Research and Manufacturers of America as Amici Curiae on behalf of Plaintiffs and Appellants.

Horvitz & Levy, David S. Ettinger, Mitchell C. Tilner, Daniel J. Gonzalez, Encino; Barger & Wolen, Steven H. Weinstein and Robyn E. King for Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange, The Association of California Insurance Companies, The Personal Insurance Federation of California and The National Association of Independent Insurers as Amici Curiae on behalf of Plaintiffs and Appellants.

Fred J. Hiestand, Sacramento, for the Civil Justice Association as Amicus Curiae on behalf of Plaintiffs and Appellants.

Bill Lockyer, Attorney General, Randall P. Borcherding and Kristian D. Whitten, Deputy Attorneys General, for Defendants and Respondents.

Public Advocates, Mark Savage, San Francisco, and Thorn Ndaizee Meweh for Interveners and Respondents Southern Christian Leadership Conference of Greater Los Angeles, Inc., and Consumers Union of U.S., Inc.

Gail Hillebrand, San Francisco, for Intervener and Respondent Consumers Union of U.S., Inc.

Kevin Stein, New York, NY, for California Reinvestment Committee as Amicus Curiae on behalf of Interveners and Respondents.

John A. Russo, City Attorney (Oakland), Barbara J. Parker, Chief Assistant City Attorney, and Daniel Rossi, Deputy City Attorney for City of Oakland as Amicus Curiae on behalf or Interveners and Respondents.

Dennis J. Herrera, City Attorney (San Francisco), Owen J. Clements, Chief of Special Litigation, and Ellen M. Forman, Deputy City Attorney, for City and County of San Francisco as Amicus Curiae on behalf of Interveners and Respondents.

Harvey Rosenfield and Pamela Pressley for The Proposition 103 Enforcement Project as Amicus Curiae on behalf of Interveners and Respondents.

12 Cal.Rptr.3d 344

BROWN, J

In 1988, voters passed Proposition 103, which made "numerous fundamental changes in the regulation of automobile and other types of insurance." (Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 812, 258 Cal.Rptr. 161, 771 P.2d 1247 (Calfarm).) "Formerly, the so-called `open competition' system of regulation had obtained, under which `rates [were] set by insurers without prior or subsequent approval by the Insurance Commissioner ....'" (20th Century Ins. Co. v. Garamendi (1994) 8 Cal.4th 216, 240, 32 Cal.Rptr.2d

12 Cal.Rptr.3d 346

807, 878 P.2d 566 (20th Century).) Proposition 103 altered this system by adding to the Insurance Code article 10 — "entitled `Reduction and Control of Insurance Rates.' ([Ins.Code,] §§ 1861.01-1861.14.)" (California Auto. Assigned Risk Plan v. Garamendi (1991) 232 Cal.App.3d 904, 907, 283 Cal.Rptr. 562 (CAARP).) This new article required, among other things, approval by the Insurance Commissioner of the State of California (hereafter Commissioner)¹ for all insurance rate increases (see id. at pp. 909-910, 283 Cal.Rptr. 562), and "provide[d] for consumer participation in the administrative ratesetting process" (Walker v. Allstate Indemnity Co. (2000) 77 Cal.App.4th 750, 753, 92 Cal.Rptr.2d 132)

Pursuant, in part, to statutes enacted as part of Proposition 103, the Commissioner promulgated section 2646.6 of title 10 of California Code of Regulations (hereafter Regulation 2646.6).² Under Regulation 2646.6, subdivision (a), "[e]ach insurer writing in excess of ten million dollars in" certain "lines of insurance ... [o]n or before March 1 of every year ... shall file a Community Service Statement ... with the Department of Insurance's Statistical Analysis Bureau in Los Angeles." The statement must contain specified statistical information concerning the insurer's business in the State of California, organized by ZIP code, including information described as "Record A data."³ Record A data consists of "the total earned exposures

12 Cal.Rptr.3d 347

and total earned premiums, and the total number of exposures new, exposures canceled, and exposures non-renewed, stated separately" for each line of insurance and ZIP code. (Reg.2646.6, subd. (b)(1).) The statement, including the record A data, is subject to Insurance Code section 1861.07, pursuant to Regulation 2646.6, subdivision (c). And Insurance Code section 1861.07 provides that "[a]ll information provided to the commissioner pursuant to this article shall be available for public inspection, and the provisions of Section 6254(d) of the Government Code and Section 1857.9 of the Insurance Code shall not apply thereto."

In this case, we consider the validity of the public inspection provision found in Regulation 2646.6, subdivision (c) and the scope of the public disclosure mandate of Insurance Code section 1861.07. We conclude that (1) the public inspection provision of Regulation 2646.6, subdivision (c) is valid; and (2) Insurance Code section 1861.07 does not incorporate the exemption from disclosure found in Government Code section 6254, subdivision (k), and does not therefore exempt information protected by the trade secret privilege from disclosure.

I.

As required by Regulation 2646.6, State Farm Mutual Automobile Insurance Company, State Farm Fire and Casualty Company and State Farm General Insurance Company (collectively State Farm) filed a community service statement with the Commissioner in 1998. In a letter accompanying its statement, State Farm wrote: "STATE FARM INSURANCE COMPANIES CONSIDER[ ] THE INFORMATION CONTAINED IN RECORD A, B, AND C HEREIN AS PRIVILEGED AND CONFIDENTIAL. IT IS PROPRIETARY IN NATURE, CONSTITUTES TRADE SECRET MATERIAL, AND IS NOT TO BE DISSEMINATED BEYOND THE DESIGNATED RECIPIENTS WITHOUT THE EXPRESS WRITTEN CONSENT OF THE STATE FARM INSURANCE COMPANIES."

Despite State Farm's invocation of the trade secret privilege, the Commissioner, without notifying State Farm beforehand,

12 Cal.Rptr.3d 348

provided its community service statement to David "Birny" Birnbaum upon his request pursuant to Regulation 2646.6 and Insurance Code section 1861.03. After learning about this, State Farm sent a letter to the Commissioner, protesting the release of its trade secrets to Birnbaum and asking the Commissioner to take all reasonable steps to retrieve this information. The Commissioner then sent a letter to Birnbaum stating that it had "inadvertently released" the information and asking him to return it. Birnbaum, however, refused to do so.

State Farm then filed this action against Birnbaum and the Commissioner, seeking declaratory and injunctive relief. In its complaint, State Farm alleged that "the information contained in the Community Service Statement is confidential and constitutes trade secrets belonging to State Farm" and is not subject to public inspection under Insurance Code section 1861.07. It sought, among other things, the return of its trade secret information and an injunction barring Birnbaum from using or disclosing that information.

Soon thereafter, the Southern Christian Leadership Conference of Greater Los Angeles, Inc., and the Consumers Union of U.S., Inc. (collectively interveners), successfully intervened in the action. In their complaint, the interveners sought a declaration "that the Community Service Statement and data insurers file with the [Commissioner] ... are public records subject to public inspection and not exempt from public disclosure."

State Farm then amended its complaint. The amended complaint included the interveners and clarified that only the record A data was a trade secret. State Farm also added two declaratory relief claims. First, it sought "a declaration that 10 C.C.R. § 2646.6(c) is invalid to the extent that it purports to make Insurance Code § 1861.07 applicable to data submitted by State Farm pursuant to 10 C.C.R. § 2646.6, and purports to make data submitted in confidence by State Farm pursuant to 10 C.C.R. § 2646.6 publicly available." Second, it sought a "declaration that Insurance Code § 1861.07 does not abrogate trade secret rights; that trade secret protections apply to information submitted under Insurance Code § 1861.07; that State Farm's data submitted in Record A ... constitutes a trade secret; and that, if Insurance Code § 1861.07 applies to data submitted pursuant to 10 C.C.R. § 2646.6, State Farm's data submitted in Record A to each of its Community Service Statements must be held as confidential by the [Commissioner] and cannot be produced pursuant to a Public Records Act request."

After the trial court dismissed Birnbaum from the action,⁴ both the Commissioner and the interveners moved for summary judgment. The court granted both motions. In granting the Commissioner's motion, the court held that the Commissioner "did not exceed [his] powers in...