Lara proposal targets a beleaguered Consumer Watchdog

Insurance Commissioner Ricardo Lara announced Friday proposed regulations that seek to strike at a financial model employed by Consumer Watchdog, the crusading consumer advocacy organization that has long faced criticism over money it makes by intervening in insurance rate-setting proceedings.

“Consumers are frustrated with hidden fees, especially when insurance costs are already exorbitant and unaffordable for many,” Lara said in a press release that went out at 1:38 p.m. Friday. “California’s insurance crisis demands tough decisions and accountability from everyone involved – insurance companies, intervenors, and the Department itself. To stabilize our market, we need a rate review system that delivers timely, fair, accurate, and through decisions, rather than one that gets bogged down in process or delays real solutions.”

Previously known as the Foundation for Taxpayer and Consumer Rights, Consumer Watchdog was founded in 1985 by Harvey Rosenfield, the public interest lawyer who later authored Proposition 103. That ballot measure, approved by California voters in 1988, was intended to protect consumers from arbitrary rate increases.

Harvey Rosenfield. Image by AP

The initiative established a public administrative process for setting and raising insurance rates, which included an opportunity for third-party “interveners” to participate by offering technical input. Under Prop. 103, intervenors may recover their costs for participating from the insurers, who are authorized to pass along the expense to consumers.

Since 2013, Consumer Watchdog, whose leaders also often provide compelling, pithy quotes on California political matters, has pocketed about 90 percent of all intervenor fees generated under the Prop. 103 process. In three of those years (2013, 2021 and 2024), Consumer Watchdog was the only entity to even act as an intervenor.

For that work, the nonprofit has netted more than $12.5 million, prompting criticism that Consumer Watchdog has created a system that uniquely benefits itself.

Fees for ‘substantial contribution’
Without mentioning Consumer Watchdog by name, the press release said “(t)he proposed regulations will clarify how intervenor participation is objectively valued and compensated, ensuring that consumers, policyholders, and taxpayers only fund substantial contributions to the public interest.”

The press release goes on to say that “the current intervenor system has not been updated since 2006. Stakeholders – including consumer advocates, insurers, and the public – have expressed concerns that the process established decades ago by former Insurance Commissioner [and current U.S. Rep.] John Garamendi (D-California) lacks transparency, is dominated by a small number of recurring participants, and can lead to unnecessary delays and costs for consumers and taxpayers.”

The line about a small number of players dominating the proceedings is hyperlinked in the press release to a California Department of Insurance chart breaking down intervenor compensation for 2025. Consumer Watchdog is one of only two intervenors listed.

“Consumers are frustrated with hidden fees, especially when insurance costs are already exorbitant and unaffordable for many.”

The Consumer Federation of California Education Foundation is listed as the intervenor on two files. Consumer Watchdog is the intervenor on the other 24.

“We want diverse voices to be heard from every corner of our state,” Lara said in the press release. “Our rural and Sierra Nevada communities, which have been disproportionately affected by wildfires, have historically been excluded from the intervenor process. This regulation aims to create a stronger and more equitable system for all consumers across California, not just a select few who have mastered the current system.”

Under Lara’s newly proposed regulations, the insurance commissioner would have the authority to determine whether an intervenor “has made a substantial contribution to the adoption of any order, regulation or decision” for compensation. That would open the door for Lara himself, an unabashed critic of Consumer Watchdog, to cut the organization’s intervenor revenue.

When asked if the regulation was intended specifically for Consumer Watchdog, spokesman Gabriel Sanchez did not mention them by name, telling Capitol Weekly simply, “It’s about protecting consumers.”

Mounting attacks from the insurance industry
Lara, however, transparently telegraphed that the organization was squarely in his sights at Capitol Weekly’s May 14 “California Insurance Crisis” conference, where he said in a keynote address that the organization has become powerful in a system that rewards gridlock, “where being loud has often mattered more than actually being effective.”

“The system isn’t working and it hasn’t been working for decades,” said Lara, who specifically called out Consumer Watchdog for collecting millions of dollars in fees that are passed onto consumers in their rates. “And that’s why we are building a new path forward. It’s unrealistic to promise that prices will go down overnight, but we are building a system where people can pay for coverage they can actually get.”

Jamie Court, Consumer Watchdog’s president, told Capitol Weekly on Friday afternoon after the announcement that the insurance commissioner’s proposed regulations show Lara is trying to “run us out of the system” by attempting to make intervening in insurance cases more difficult and more costly.

“What this does is disincentivizes intervenors from participating, which exactly is the opposite from what the commissioner said he wants to do,” Court said. “He said he wants to get more intervenors, but if he’s making it harder for them to get paid, how is he going to have more intervenors? If he’s making it harder for them to be able to show a contribution, how is he going to have more intervenors?”

Jamie Court, image by AP.

Court said Lara is trying to say, “if you don’t agree with the commissioner, if you don’t agree with the way he’s going, he will have the power to deny your compensation.”

While the specific nature of the proposed regs was unknown to Consumer Watchdog before Friday, the organization had been expecting Lara to announce a something targeting its intervenor work for some time.

The insurance commissioner’s announcement comes as criticism against the Consumer Watchdog and its leaders seemed to be intensifying as an independent insurance agent named Elizabeth Hammack submitted a proposed ballot measure in August to repeal Prop. 103.

On Wednesday, Court, Rosenfield and Consumer Watchdog Executive Director Carmen Balber filed their own proposed ballot measure, the Insurance Policyholder Bill of Rights, which seeks to prevent insurance companies from denying coverage to homeowners who meet wildfire mitigation standards.

“What this does is disincentivizes intervenors from participating, which exactly is the opposite from what the commissioner said he wants to do.”

The dueling ballot measures suggest Consumer Watchdog could be in for more fights. Indeed, the organization recently was hit with yet another criticism, this time from an insurance industry leader who has questions about a Consumer Watchdog funding source that was exhausted not long ago.

A settlement with Allstate
Beginning in 1999, Rosenfield and Consumer Watchdog tapped a little-known nonprofit called the Consumer Education Foundation to support their work. But after years of giving money to both of them, its funds have nearly run out.

Alan Smith, president of the Western Insurance Agents Association and a vocal critic of Rosenfield and Consumer Watchdog, told Capitol Weekly before the insurance commissioner’s Friday announcement that the history of CEF suggests the image of Rosenfield and Consumer Watchdog as selfless advocates for consumers is dubious at best.

“I’m not accusing Harvey Rosenfield of anything,” Smith told Capitol Weekly. “To me, the transactions raise a lot of questions.”

CEF traces its origins to 1997, when Rosenfield sued the Allstate Insurance Company in Los Angeles Superior Court, alleging that in the wake of the Northridge earthquake three years earlier the company systematically altered engineering reports in order to reduce its payments to policyholders.

A year later, the insurance giant settled the case in part by agreeing to donate $5 million to a nonprofit foundation for which Rosenfield would select its board of directors.

In a May 2000 article in the Orange County Register, then-reporter Daniel Weintraub wrote that Rosenfield initially thought the $5 million should go to the Red Cross for future earthquake-disaster relief, then decided, “the money might not be spent that well. Not as well as I could spend it.”

Rosenfield used the settlement to establish the Consumer Education Foundation, a nonprofit separate from Consumer Watchdog and specifically dedicated to helping consumers prevent damage to their property during disasters, monitor policyholder-owned insurance companies as they convert into for-profit concerns and generally promote a consumer-protection agenda.

CEF’s board members have come and gone over the year, but from 1999 to 2024, the most recent year disclosures are available, its leadership has had one constant – its president, Rosenfield.

Investments in Enron
Like Consumer Watchdog, CEF has cultivated an anti-corporate image. But in 2001, the Los Angeles Times reported that under Rosenfield’s leadership it owned 150 shares of Enron stock as part of a $4.6 million stock portfolio. This was during the 2000-01 energy crisis, which later was founded to have been fueled in part by the disgraced energy giant’s manipulation of the market.

Rosenfield told the Times back then that he was unaware of CEF’s ownership of Enron stock because he was “out of the loop” on its financial strategy. But he argued it wasn’t a hypocritical investment. He told Times reporter Jennifer Warren in a February 27, 2001 story, “It would be one thing if we were promoting arguments that could somehow benefit the portfolio of the company. But the stuff we’re talking about – like seizing the company’s assets – wouldn’t help Enron very much.”

CEF used its investments along with interest payments to grow the original $5 million settlement by a couple of million, which records show were then channeled to two main recipients: Rosenfield and Consumer Watchdog.

According to 990 disclosures the nonprofit filed with the Internal Revenue Service, since CEF’s founding it has spent more than 60 percent of all of its money on salary payments to Rosenfield and grants to Consumer Watchdog.

“This just appears Harvey was lining his own pockets,” Smith said. “That’s what a reasonable person would say.”

Dwindling resources
While Rosenfield is synonymous with Consumer Watchdog and is listed on its website as its founder, he stepped down as president of the organization in 2003 and stopped being paid as one of its employees. After that, he’s maintained a contractual relationship with the nonprofit he founded, which proved lucrative. From 2004 to 2023, Rosenfield collected nearly $8 million in fees as an independent contractor for Consumer Watchdog.

But beginning in 1999, Rosenfield also had another employer, the Consumer Education Foundation, which paid him an annual salary of $100,000 almost every year until 2021. (CEF paid Rosenfield only $83,333 in 2017 and $91,667 in 2019; it paid him nothing in 2022.)

“This just appears Harvey was lining his own pockets….That’s what a reasonable person would say.”

In all, Rosenfield made more than $2 million in salary for his work as president of CEF.

Combined, Rosenfield pocketed nearly $10 million from 1999 to 2023 in his dual roles as president of CEF and an independent contractor for Consumer Watchdog. Meanwhile, CEF today has only $4,224.40 in remaining assets.

“It appears they pillaged the organization,” Smith said.

A vetted relationship
Rosenfield and Court don’t contest the dollar figures reported here but refute Smith’s suggestion that CEF’s money was used for anything other than to legitimately help consumers.

Rosenfield said he and several other lawyers were involved in the lawsuit against Allstate, but by the time the settlement came around the others had dropped off from the case, leaving him to resolve the matter. He said CEF was born from his desire to get Allstate to do something good for California consumers.

“I realized, what could Allstate really do?” Rosenfield said. “They promised to pay all the claims. There were outstanding lawsuits, which they resolved. And so, what could we get them to do that would really be good for consumers in California?”

He continued: “They did not want Consumer Watchdog to get $5 million and turn around and spend it against them. But they didn’t mind us doing non-litigation advocacy.”

So, Rosenfield said he set up CEF to promote consumer rights on its own as well as through grants to two recipients, the Center for Insurance Research in Cambridge, Mass. and Consumer Watchdog.

Rosenfield said he specifically got permission from Allstate’s general counsel to give grants to Consumer Watchdog. Court provided Capitol Weekly with grant agreements between CEF and Consumer Watchdog showing that Consumer Watchdog would not use CEF money to pay for anything related to Prop. 103 or Rosenfield.

“All of these things were, and always are, vetted by independent law firms,” Rosenfield said. “Because we were, and are, under an enormous microscope. And they’re just waiting for us to do something wrong in order to pounce on us.”

‘Nobody is complaining’
Rosenfield said he resigned his position from Consumer Watchdog for several reasons. Because he needed to make more money to support his family. Because he didn’t think he was well suited to raise money for Consumer Watchdog, a task in which he said Court excels. And because he wanted to follow in the footsteps of his role model of sorts, Ralph Nader, who he said would start organizations and move on.

In his role as an independent contractor for Consumer Watchdog, Rosenfield said he’s paid a retainer for work that largely involves filing and litigating lawsuits. Court said in the event Rosenfield secures a judgement for Consumer Watchdog, his retainer fee is subtracted from the resulting dollar figure and, of the remaining money, Rosenfield may collect up to a total of $450,000 in a single year.

“I make a lot of money,” Rosenfield said. “Our lawyers have vetted it, and the more important thing is other than insurance industry, nobody is complaining. Right? You know, people don’t come up to me in the street and say, ‘You greedy son of a bitch.’ They say, ‘Thank you.’ They say, ‘Thank you’ – to the extent that people still know what I’m doing. I was much more of a public figure back in the day.”

Given the opportunity to also justify his salary at CEF, Rosenfield said he’s “not really interested in kinda like having to defend” himself, saying the nonprofit’s board thought it was appropriate.

“My record stands for itself,” he said.

Research and advocacy
Among his accomplishments at CEF, Rosenfield said he is most pleased with a massive, two-part report he and former Consumer Watchdog attorney (and current California Department of Justice deputy attorney general) Laura Antonini authored about how corporations have co-opted America’s civil justice system, which he said also sheds light on the country’s current political climate.

“You know, people don’t come up to me in the street and say, ‘You greedy son of a bitch.’ They say, ‘Thank you.’”

“I’m really proud of it,” he said of the reports, adding that one of them documents why and how Americans have lost faith in democracy. “My thesis is, when people say to me, ‘How do you figure Donald Trump could get elected?’ My answer is, ‘He got elected because he was appealing to the anger and frustration that people experience over decades where nobody was defending their interests,’ ” he said.

Court also provided Capitol Weekly with several reports from Consumer Watchdog to CEF on how CEF funds were used. The reports document Consumer Watchdog’s work to help craft the California Consumer Privacy Act, its efforts to expose problems in the state’s bottle-deposit recycling program and research its done into energy reform.

“A lot of that was really important work,” Court said, noting that CEF made 20 years of impact with seed funding of $5 million. “It’s gotten a lot of bang for its buck,” he said.

Good for the bottom line
Similarly, Court said that Rosenfield’s work as an independent consultant for Consumer Watchdog has been a net positive for the nonprofit.

He said that Rosenfield’s compensation is contingent upon Consumer Watchdog collecting fees from defendants in legal and administrative cases. From 2014 to 2024, he said Consumer Watchdog has received more than $6.2 million in court-awarded or Insurance Commissioner-awarded fees for Rosenfield’s work. During that same period, he said, Consumer Watchdog paid Rosenfield a little more than $4.8 million.

Furthermore, Court said the dollar figures don’t account for the money Rosenfield and Consumer Watchdog have saved consumers through their efforts, which he said totals into the billions.

Court added that Consumer Watchdog would welcome other entities acting as intervenors, but he said that kind of work has a lot of upfront expenses and that it can take a long while to ultimately collect the resulting fees. He also said Consumer Watchdog’s intervenor’s work is important to the organization’s bottom line, but no more so than its legal and administrative cases.

Court said Consumer Watchdog will withstand any attack the insurance commissioner or others might bring. He blamed Lara for the negative attention Consumer Watchdog seems to be receiving lately, saying the commissioner has not only legitimized attacks against the organization, but actively coordinated with the insurance industry to undermine it.

“They can’t meet the arguments we make on the merits,” Rosenfield said. “They have to lie and cheat and attack us personally and try to buy their way out of things that don’t go their way.”

But in his release, Lara called the current system “broken” and said it had created “real issues with the affordability and availability of insurance, as well as companies withdrawing from our state.” He further said his proposed reforms “represent another critical step toward building a market that protects consumers, holds insurance companies accountable, and bases rates on facts rather than delays.”

The proposed regulations will be open for public comment for 45 days starting October, 3^rd. A public hearing on the proposal is scheduled for Nov. 20^th.