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Tag: 2017 News

Former Deputy Sheriff Guilty in “CrossFit” Fraud Case

A former Orange County Sheriff’s Department (OCSD) deputy was convicted and sentenced to six months in Orange County jail and three years informal probation on charges for committing insurance fraud by failing to disclose his true physical abilities and activities to his health care providers.

36 year old Nicholas Zappas who lives in Laguna Niguel, pleaded guilty to six misdemeanor counts of insurance fraud.

In addition to his jail time and probation, Zappas was ordered to pay $34,838.97 in restitution to the County and $1,000 to the Worker’s Compensation Fraud Assessment Fund. The defendant is also required to dismiss his 2011 and 2015 worker’s compensation claims with prejudice as a condition of his probation.

At the time of the crimes, Zappas was employed as an OCSD deputy for approximately 14 years.

On April 2, 2015, while working Harbor Patrol and engaged in a boat rescue, Zappas tripped over a fire hose and fell on his back. He filed a workers’ compensation insurance claim for injuries to his left shoulder, left side of his neck, and lower back.

Zappas was placed on work restrictions of no lifting, pushing, or pulling greater than 10 pounds by a medical doctor due to the defendant’s complaint of pain. OCSD accommodated the work restrictions and Zappas was assigned to dispatch.

Between May 2015 and November 2015, Zappas engaged in CrossFit, which is a high-impact exercise with varied functional movements. The defendant appeared on video while engaging in CrossFit, including lifting substantial weights in excess of 200 pounds, performing box jumps, burpees, squats, and other activities that were contrary to the limitations imposed by the doctor based on the defendant’s description of his pain, symptoms, and limitations. Zappas failed to disclose that he was participating in CrossFit to his medical physicians.

On Dec. 1, 2015, while under oath during his deposition, Zappas denied lifting anything over 20 pounds since the date of his injury and claimed that he could not lift anything heavy, could not do squats, and could not run.

Between January 2016 and May 2016, Zappas continued to engage in CrossFit and did not disclose his abilities to his medical physicians.

Deputy District Attorney Pamela Leitao of the Insurance Fraud Unit prosecuted this case.

FDA Rejects New Naloxone Intranasal Injector

After coming under fire from angry lawmakers in the wake of its recent decision to more than double the price of its opioid intervention drug naloxone, Amphastar says that the FDA has handed it a rejection for an intranasal version of the treatment.

The Rancho Cucamonga, California based biotech company did not spell out all the reasons for the rejection or go into much detail in its statement, but the company cited the agency’s questions about a “user human factors study, device evaluation, and other items.”

CRLs, though, aren’t public, so there’s no way to check on exactly what regulators are objecting to.

Naloxone is a medication used to block the effects of opioids, especially in overdose. When given intravenously, it works within two minutes, and when injected into a muscle, it works within five minutes. The medication may also be used in the nose. The effects of naloxone last about half an hour to an hour

Naloxone was patented in 1961 and approved for opioid overdose by the Food and Drug Administration in 1971. It is on the World Health Organization’s List of Essential Medicines, the most effective and safe medicines needed in a health system. Naloxone is available as a generic medication.

A pair of US senators, Susan Collins and Claire McCaskill, on the Special Committee on Aging, took Amphastar, Pfizer, Mylan, Adapt Pharma and Kaleo to task last summer for hiking the price of naloxone as opioid abuse ran rampant in the country.

Amphastar raised its price of naloxone in early 2015 from $19 a dose to $41 and lawmakers have criticized the players in the field for a ten-fold increase in recent years, right alongside a national opioid addiction crisis.

Amphastar’s CEO, Dr. Jack Zhang, stated: “While we are disappointed to have not received approval at this time, we intend to continue to work with the FDA to address their concerns in the CRL and hope to bring Intranasal Naloxone to the market as soon as possible.”

Amphastar already sells naloxone in pre-filled syringes, as does privately held Kaleo Pharmaceuticals, which came under fire earlier this year for raising the price of its naloxone device Evzio by 550 percent to $4,500.

Adapt Pharma Ltd already has two naloxone nasal spray formulations approved by the U.S. FDA.

Convicted Chiropractor Attacks New Law

California lawmakers passed new law last year to limit lien claims by medical providers who are charged with or convicted of fraud related crimes.

SB 1160 provides that in the event a lien filer is charged with workers’ compensation fraud, Medi-Cal fraud, or Medicare fraud, all liens are stayed pending resolution of the charges. And AB 1244 provides that If a vendor is convicted of fraud, then they are automatically suspended from treating in workers’ compensation, and the Administrative Director is to create a list of all names of suspended vendors on their website.

Last Friday, the DWC announced the suspension of seven medical providers from participating in California’s workers’ compensation system. The providers have been convicted of workers’ comp fraud or have been suspended from the Medicare or Medicaid programs for medical fraud. The suspended providers have filed more than 8,500 liens in California’s workers’ compensation system, with a total of claim value of at least $59 million.

But one convicted chiropractor has fought back, challenging the constitutionality of the two new laws.

The Department of Justice announced that Chiropractor Michael E. Barri, 48, of San Clemente, who owned and operated the Santa Ana companies Tri-Star Medical Group and Jojaso Management Company, pleaded guilty on March 11, 2016 to a conspiracy count and admitted that he received illegal kickbacks for referrals to Pacific Hospital of Long Beach. During a nine-month period that ended in 2013, Barri admitted receiving $158,555 in illegal kickbacks after referring a dozen patients to Pacific Hospital, where they had back surgeries. As a result of his referrals, Pacific Hospital billed insurance carriers approximately $3.9 million for spinal surgeries.

Barri has also been indicted by an Orange County Grand Jury in 2014 with charges of kickbacks and related offenses involving compounded medications, along with Kareem Ahmed the owner of Landmark Medical, and 13 other named providers. Much of that case was dismissed by the Court of Appeal in 2016. However some of the charges have been re-filed by the Orange County District Attorney, and it is not clear how much of the original indictment will proceed, and what defendants will be involved.

Nonetheless, Chiropractor Barri filed case A150549 with the California First District Court of Appeal  on February 15, seeking to have SB 1160 and AB 1244 declared to be unconstitutional, so that he and his company Tri-Start Medical Group can continue to collect workers’ compensation liens. Among other theories, Barri alleged “The Lien Stay Provision Violates Petitioners’ Right to Due Process Under the California and United States Constitutions.”

He further claimed that “Prompt action is essential. The new provisions took effect on January 1, 2017. Dr. Barri and Tristar, along with similarly situated lien claimants, will suffer irreparable injury if the Court does not immediately grant the requested relief. California already has applied the Lien Stay Provision to Dr. Barri’s liens, and approximately 200,000 other liens valued at over one billion dollars” and “Absent immediate relief, under the Lien Stay Provision, Dr. Barri will be deprived of his constitutional right to secure counsel of his choice in the criminal proceeding pending against him. Without the income provided by untainted liens, Dr. Barri simply cannot afford capable counsel” and “The liens that will be stayed provide Dr. Barri with his sole source of income, and a stay will make it impossible for Dr. Barri to pay his defense attorneys’ fees and his living expenses.” His attorneys concede that Barri “resides in Dana Point, Orange County, California” no doubt a very expensive place to live.

He did not get very far with his newly filed case.

Court records reflect that on February 17, the Court of Appeal issued the following order. “The petition for peremptory and/or alternative writs of mandate, prohibition, or other appropriate relief is denied as premature, given that a hearing on the suspension under Labor Code section 139.21 is scheduled for February 24, 2017 before a hearing officer of the Division of Workers’ Compensation, and the suspension is stayed pending the outcome of that hearing. The court also questions whether this is the proper appellate district to file this petition, given that none of the petitioners reside or have their principal place of business in this appellate district. The request for a stay is denied. (Ruvolo, P.J., Reardon, A.P.J., and Rivera, J. participated in the decision.)”

Oakland Comp Attorney Pleads Guilty

Marc Terbeek, an East Bay workers’ compensation attorney who also represents marijuana dispensary operators appeared in federal court this month and admitted to counts one (29 U.S.C. § 186(a)(2)-Making A Payment To A Union Employee) and two (12 U.S.C. § 1956- Willful Violation of Anti-Structuring Regulation) of the Information filed in federal court case 4:17-cr-00087-HSG.

According to court documents, between 2010 and 2015, Terbeek paid money to “D.R.” in exchange for having business improperly steered to him. The initials refer to Daniel Rush, who was at the time the organizing coordinator of the cannabis division of the United Food and Commercial Workers union.

Rush was charged in 2015 in federal court with honest-services fraud and accepting payments in violation of the Taft-Hartley Act, which restricts the activities and power of labor unions. Rush’s trial is set to begin in March.

Terbeek was allegedly involved in the massive corruption case filed by the FBI’s Public Corruption and Civil Rights Squad. The FBI and IRS raided Terbeek’s office in January 2015 and since then he has been cooperating with investigators.

Daniel Rush was an official with the United Food and Commercial Workers Union that had established a “Cannabis Division” to organize dispensary employees. He was also closely involved in Measure D, the process to regulate medical marijuana dispensaries in Los Angeles, and also connected to legalization’s most prominent pitchman: Lt. Gov. Gavin Newsom.

According to the allegations of paragraph 31 of the Affidavit , Tarbeek admitted to the FBI that he had been paying “kickbacks” to Rush for sending Terbeek legal work since 2004. Rush “encouraged” Terbeek to acquire a workers compensation law practice to litigate cases referred by the Insitutio Laboral de la Raza. In exchange Tarbeek gave Rush a credit card associated with Terbeek’s law firm and Terbeek paid it off routinely. Text messages confirmed this practice continued as late as February 2015. From 2010 to 2015, Rush spent $110,000 on Terbeek’s card, about $2,000 per month, for mostly personal expenses.

Also, Terbeek allegedly agreed to share legal fees with Rush derived from Terbeek’s clients seeking permits to operate dispensaries in California, Nevada, and beyond (Affidavit paragraph 34). After creation of this arrangement, Terbeek paid Rush $5000 as his “share” of the medical marijuana legal fees.

Terbeek’s attorney, Ed Swanson said, “Mr. Terbeek has been fully cooperative with the government’s investigation of this case. He regrets his actions and accepts full responsibility for his conduct.” The case was continued to May 22, 2017 at 2:00 p.m. for sentencing.

California State Bar records reflect that there is no public record of discipline or administrative actions against Mr. Terbeek, and he remains an active member of the State Bar.

Drug Monitoring Databases Cut Doctor Shopping 80%

A new study published in the International Journal of Addictive Behaviors found that state programs that require physicians to check drug registries before writing prescriptions appeared to slash the odds of doctor-shopping for opioid pain relievers.

According to the report by Reuters Health, the study “shows that prescription-drug monitoring programs are a promising component of a multifaceted strategy to address the opioid epidemic,” Ryan Mutter, one of the study authors, said in a phone interview. He is a health economist at the Substance Abuse and Mental Health Service Administration in Rockville, Maryland.

Mutter and other researchers analyzed annual nationwide surveys of drug use and health from 2004 until 2014, when 36 states implemented prescription-drug monitoring programs, or PDMPs.

PDMPs are state-run electronic databases designed to track prescribing of controlled substances and to identify people at high risk of using opioids for nonmedical purposes. Every state except Missouri now has a drug-monitoring program. Some states have mandatory programs requiring physicians to participate, and other states have voluntary programs.

California is one of many states that maintain a drug registry. CURES 2.0 (Controlled Substance Utilization Review and Evaluation System) is a database of Schedule II, III and IV controlled substance prescriptions dispensed in California serving the public health, regulatory oversight agencies, and law enforcement. CURES 2.0 is committed to the reduction of prescription drug abuse and diversion without affecting legitimate medical practice or patient care.

The study found that in states where physicians were required to check an electronic database before writing an opioid prescription, the odds that two or more doctors would be giving pain relievers for nonmedical purposes to a single patient were reduced by 80 percent. States that implemented voluntary monitoring programs showed a 56 percent reduction in the odds of doctor-shopping.

States with mandatory prescription-drug monitoring programs reduced the use of painkillers for nonmedical purposes by an average of 20 days a year, the study found. States with voluntary prescription-drug monitoring program reduced the use of painkillers for nonmedical purposes by an average of 10 days a year.

“Overall, this, as well as other studies, suggests there’s promise for prescription-drug monitoring programs,” Dr. Stephen W. Patrick said in a phone interview. “But they aren’t a panacea.”

The number of PDMPs has expanded rapidly across states since 2000, but prior studies have shown mixed results about their effectiveness, the study authors write.

One previous study found that drug-monitoring programs help prevent 10 opioid-overdose deaths a day in the U.S., yet improvements could save another two people a day. States with the most robust programs – ones that tracked a greater number of potentially addictive medications and updated their databases at least weekly – saw the biggest drops in overdose deaths, the previous study showed.

Public health advocates worry that an unintended consequence of drug-monitoring programs could be that opioid users would seek drugs illegally and turn to heroin, the authors write. But the current study found that PDMPs did not lead to an increase in people starting to use heroin.

Lead author Mir M. Ali said in a phone interview he found it “reassuring” that drug-monitoring programs were not responsible for opioid users substituting heroin. Ali is a health economist at the Substance Abuse and Mental Health Services Administration.

HHS Fraud Prevention Focus May Change

On Feb. 5, 2017 President Trump’s nominee to be secretary of Health and Human Services (HHS), Representative Tom Price (R-GA), was confirmed by the Senate. What will his appointment mean in the government’s battle to thwart healthcare fraud and abuse?

A report by the Journal of Emergency Medical Services reports “We do not expect the federal government’s scrutiny of healthcare reimbursement to diminish under the Trump administration and Secretary Price, but the focus on how to accomplish that scrutiny may shift.”

When asked by Senator Orrin Hatch (R-UT) what he believed HHS [which includes the Centers for Medicare and Medicaid Services (CMS)] should be doing in the fight against fraud and abuse, Price said he felt that the focus should be more on going after the truly “bad actors” and that it should be done “in real time.”

This was direct reference to CMS’ data analytics approach and data mining that is now beginning to be used to identify outliers and those providers who stick out among their peers as potentially billing particular payment codes improperly or excessively.

This effectively moves away from the “pay and chase” model that has been the hallmark of Medicare audits – pay the claims and then do a post-payment audit. The more recent data-driven approach to identify improper billing makes good sense when comparing similar health providers with similar lines of service.

Price then went on to say this data analytics approach should be used “instead of trying to determine if every single instance of care was necessary,” – a direct reference to the current practice of CMS contractors that finds fault in claims for failure to meet medical necessity requirements.

That is why, in great part, there is such a backlog of Medicare appeals stuck at the administrative law judge level – improper medical necessity determinations made at the lower levels of appeal by the very Medicare contractors that pay the claims.

DWC Suspends Collections for Seven Lien Providers

The Department of Industrial Relations and its Division of Workers’ Compensation has suspended seven medical providers from participating in California’s workers’ compensation system.

The providers have been convicted of workers’ comp fraud or have been suspended from the Medicare or Medicaid programs for medical fraud. The suspended providers have filed more than 8,500 liens in California’s workers’ compensation system, with a total of claim value of at least $59 million.

“We are moving quickly to use new anti-fraud tools at our disposal to suspend those proven to game the workers’ comp system at the expense of injured workers and employers,” said Division of Workers’ Compensation Acting Administrative Director George Parisotto.

“Workers’ compensation fraud undermines the state’s efforts to increase payments and improve services to injured workers, and to reduce costs for employers,” said DIR Director Christine Baker. “Removing fraudulent providers and staying lien claims of those criminally-charged with fraud will further reduce costs in the system.”

The suspended providers include:

1) Philip Sobol, an orthopedic surgeon in Los Angeles convicted in Santa Ana’s federal District Court for insurance mail fraud and other charges connected to receiving workers’ comp kickbacks. Dr. Sobol has nearly 6,000 active workers’ compensation liens with an estimated total claim value of more than $42.7 million.

2) Jason Hui-Tek Yang, a psychiatrist in Pasadena convicted in Riverside County Superior Court for his involvement in an insurance fraud conspiracy, including the referral of patients for unnecessary care to justify workers’ compensation billing. Dr. Yang has over 2,000 active workers’ compensation liens with an estimated total claim value of more than $13.7 million.

3} Alan Ivar, a chiropractor in Costa Mesa convicted in Santa Ana’s federal District Court for referring patients to a Long Beach hospital in a kickback scheme for well over a decade. Dr. Ivar still has over 400 active workers’ compensation liens with an estimated total claim value of more than $2.5 million.

4} Thomas M. Heric, a physician in Los Angeles convicted in Sacramento’s federal District Court for health care fraud related to the Medicare and Medicaid programs who was suspended from those programs.

5) Carlos Arguello, a Chula Vista businessman convicted in San Diego’s federal District Court for his role in a kickback scheme that involved referring injured workers to specific chiropractors for medical care regardless of their injuries.

6} Daniel Dahan, a former chiropractor in Long Beach suspended from the Medicare and Medicaid programs who surrendered his license to practice.

7} Boniface Okwudili Onubah, a former neurologist in Marina Del Rey suspended from the Medicare and Medicaid programs whose medical license was revoked.

Suspension notices were issued to the providers on January 17, 2017, by the Division of Workers’ Compensation’s Acting Administrative Director George Parisotto. The suspension becomes effective 30 days later if the provider does not appeal the action.

An additional three providers who were notified of the pending suspension have filed appeals of the action. Those appeals are in process.

AB 1244 (Gray and Daly) requires the Division of Workers’ Compensation (DWC) Administrative Director to suspend any medical provider, physician or practitioner from participating in the workers’ compensation system when convicted of fraud. DWC has adopted provider suspension regulations on the new law, which requires providers to be suspended from the system for one or more of the following grounds:

— The provider has been convicted of a crime involving fraud or abuse of the Medi-Cal or Medicare programs or the workers’ compensation system, fraud or abuse of a patient, or related types of misconduct;

— The provider has been suspended due to fraud or abuse from the Medicare or Medicaid (including Medi-Cal) programs; or

— The provider’s license or certificate to provide health care has been surrendered or revoked. DIR has posted information on its fraud prevention efforts online, including a report on its anti-fraud efforts in the California workers’ compensation system.

North Hollywood Cab Driver was Employee

Emanuele Secci was driving his motorcycle through an intersection in the City of West Hollywood when a taxi driven by Aram Tonakanian coming from the opposite direction, turned left directly in front of him causing injury.

At the time Tonakanian was driving a green and white taxi marked with a United Independent Taxi Drivers, Inc. insignia.

The jury found Tonakanian to be United’s agent, but not an employee. The court granted United’s motion for judgment, and Secci appealed. The Court of Appeal reversed in the published opinion of Secci v United Independent Taxi Drivers Inc.  The case involves the application of the rules for establishing an independent contractor status

Like other owner-drivers, Tonakanian owned his taxi and set his own hours. Tonakanian’s contract with United stated he was an independent contractor. Drivers paid monthly dues and other fees to cover United’s expenses.

United provided marketing and advertising. Each United taxi had the company’s phone number painted on it. If a customer called the number, a dispatcher would enter the location information into a computer, and the computer would send out a dispatch request. In order to receive dispatch requests, a driver would check into the zone where he or she was located. Drivers were free to accept or reject dispatch requests, and could pick up passengers on the street, so long as they were licensed to accept fares within that city.

Drivers were required to use uniform credit card and dispatch equipment chosen by United. Credit card charges were initially paid to United, which would deduct credit card processing fees, monthly dues, and a small fee for accounting. Taxi rates were set by meter. Drivers were not free to charge flat or discounted rates. United required its drivers to accept vouchers and coupons that drivers could later submit to United for payment. If a driver transferred ownership of a United taxi, the buyer and seller had to notify United and pay a $500 transfer fee.

United provided a training manual to each of its drivers. It required drivers to keep a copy of the manual in the taxi and to complete a training course before taking the city’s licensing test. The training manual provided specific information about the drivers’ appearance, including a dress code, as well as specifics about driving safely, conducting themselves while waiting in taxi lines, and interacting with passengers politely.

United drivers were expected to abide by the company’s rules and regulations, and drivers acknowledged their relationship with United could be terminated for violations of those rules.

A corporation may be held vicariously liable as a principal for the torts of its agents. (Meyer v. Holley (2003) 537 U.S. 280, 285 – 286.) “Whether a person performing work for another is an agent or an independent contractor depends primarily upon whether the one for whom the work is done has the legal right to control the activities of the alleged agent.”

In Yellow Cab Cooperative, Inc. v. Workers’ Comp. Appeals Bd. (1991) 226 Cal.App.3d 1288 (Yellow Cab), the court held a taxi driver who leased his taxi from the lessor taxi company was an employee, not an independent contractor, for the purpose of workers’ compensation law. (Discussing S. G. Borello & Sons, Inc. v. Department of Industrial Relations, supra, 48 Cal.3d 341}

Viewed in the light most favorable to Secci, the evidence presented at trial was sufficient to support a jury finding that Tonakanian was United’s agent and United was vicariously liable for Tonakanian’s acts.

CWCI Reviews Central Coast Claims

The California Workers’ Compensation Institute (CWCI) has issued a new “Regional Score Card,” the sixth in its research series that looks at workers’ comp claims experience in 8 different regions of California.

The new Score Card provides detailed data from more than 127,000 claims for 2005-2015 injuries filed by residents of the Central Coast — a 300-mile long region encompassing Ventura, Santa Barbara, San Luis Obispo, Monterey, and Santa Cruz Counties — and compares the results to those from 1.7 million claims from the rest of the state.

For the entire 11-year span covered by the Score Card, claims by Central Coast workers represented 6.7% of all California workers’ compensation claims and 6.3% of all claim payments, though with a shift in the state’s population and job market in recent years, the proportion of claims from the region has increased, with Central Coast workers accounting for 7.7% of all California job injury claims in accident year (AY) 2015.

Average payments on these claims – almost a quarter of which involved agricultural workers — have shown recent increases as well. For example, average 36-month paid losses on Central Coast claims rose from $26,194 for AY 2005-2007 claims to $35,874 for AY 2011-2012 claims. Other Score Card findings show:

1) Time lags from the date of injury to employer notification, claims administrator notification and initial treatment are significantly less on the Central Coast than in other regions, and claim durations are shorter;

2) At 24 months post injury Central Coast claims average more medical visits for evaluation/management, physical therapy, and chiropractic care, while the biggest difference in medical payments is in surgery, where Central Coast claims at the 2-year benchmark average 11.2% more than in the rest of the state;

3) 4 of the top 10 drugs (based on 2014 payments) prescribed to Central Coast injured workers are opioids. Vicodin, Oxycodone, Tramadol, and Fentanyl together account for 20% of the region’s total drug spend.

In addition to providing a profile of Central Coast claimants, the Score Card shows claim distributions for the region broken out by industry, nature and cause of injury, primary diagnostic category, and by employer premium. Claim closure rates at 24 months and average claim durations are provided for med-only claims, lost-time claims, and all claims.

The Score Card also notes claim and payment distributions by claim type (med-only, temporary disability, permanent disability, and death), and attorney involvement rates for all indemnity claims and permanent disability claims that are at least 36 months old, with comparative results shown for the rest of the state.

Recent CWCI Score Cards examined claims from Los Angeles County; the Inland Empire/Orange County; the Central Valley; the Bay Area; and San Diego County. All of the Score Cards and summary Bulletins are available to CWCI members and research subscribers who log on to, while others may purchase them from The next Score Card in the series will focus on claims from the Northern Counties.

CDI Disallows Advertising Costs for Rate Calculation

At the November 8, 1988, General Election, the voters approved an initiative statute that was designated on the ballot as Proposition 103. The measure made numerous fundamental changes in the regulation of automobile and other forms of insurance in California.

Formerly, the so-called “open competition” system of regulation, rates were set by insurers without prior or subsequent approval by the Insurance Commissioner . Under that system, California had less regulation of insurance than any other state, and in California automobile liability insurance was less regulated than most other forms of insurance.

Proposition 103 instituted a permanent regulatory regime comprising the “prior approval” system, under which the Insurance Commissioner must approve a rate applied for by an insurer before its use, looking to whether the rate in question is excessive, inadequate, unfairly discriminatory or otherwise in violation of’ specified law — considering the investment income of the individual insurer and not considering the degree of competition in the insurance industry generally.

The California Supreme court reviewed and approved Proposition 103 against challenges under the United States and California Constitutions in a series of cases filed by insurance carriers.

In 2009, Mercury Casualty Co. filed an application with the California Insurance Commissioner to increase its homeowners’ insurance rates. Originally, Mercury sought an overall rate increase of either 8.8 percent or 6.9 percent.

In denying the increase Mercury requested, the California Insurance Commissioner made two decisions that are at issue on appeal.

First, the commissioner determined that Mercury’s entire advertising budget had to be excluded from the calculation of the maximum permitted earned premium because “Mercury aims its entire advertising budget at promoting the Mercury Group as whole” rather than seeking to obtain business for a specific insurer and also providing customers with pertinent information about that specific insurer. Second, the commissioner determined that Mercury did not qualify for a variance from the maximum permitted earned premium because Mercury failed to demonstrate the rate decrease that resulted from application of the regulatory formula results in deep financial hardship.

In June 2014, the superior court issued its ruling denying Mercury’s petition for writ of mandate and complaint for declaratory relief in the superior court seeking review of the commissioner’s decision. The judgment was affirmed in the published case of Mercury Casualty Company v Dave Jones, as Insurance Commissioner.

On appeal, Mercury contends the commissioner erred in disallowing all of Mercury’s advertising expenses in the rate calculation. In 2008, 2009 and 2010, Mercury General Corporation’s advertising expenses totaled $26 million, $27 million and $30 million respectively. The Personal Insurance Federation of California intervened in the action on behalf of other industry stakeholders.

Section 2644.10(f) provides that institutional advertising expenses shall not be allowed for ratemaking purposes, Institutional advertising means advertising not aimed at obtaining business for a specific insurer and not providing consumers with information pertinent to the decision whether to buy the insurer’s product.”

The Court of Appeal concluded “Finding no merit in these arguments, or any of the other arguments offered to overturn the judgment, we affirm.”