In a sharp rebuke to a fellow regulator, Insurance Commissioner Nonnie S. Burnes yesterday denied Attorney General Martha Coakley's attempt to obtain rate-setting documents from Commerce Insurance of Webster, Massachusetts' largest auto insurer.
The decision means Coakley will not be able to compel Commerce to produce documents that could shed light on how the insurer sets its rates for 2008, the first time in three decades auto insurers have been allowed to set their own rates in the state.
That could limit Coakley's ability to play the role of a consumer advocate as Burnes implements her plan to switch the state's auto insurance market from the former system - in which state regulators set auto insurance rates - to a new system being promoted as managed competition. She has called a series of hearings to discuss rates proposed by five of the state's 19 auto insurance companies. The first one, examining Commerce's rate filing, begins today.
Some consumer advocates said Burnes's decision is a setback for consumers.
"The ruling demonstrates that the insurance commissioner has no interest in allowing the attorney general to represent the public effectively," said Stephen D'Amato, a consultant to the Center for Insurance Research in Cambridge. "For consumers, the likely result will be excessive rates."
The move demonstrates that Burnes wants to swiftly put in place the plan she undertook less than a year ago. It also shows how the former Superior Court judge will use both the letter and the spirit of the law to maintain her grip on the reform process.
Burnes cited numerous technicalities in rejecting Coakley's effort to subpoena documents from Commerce. She wrote that the attorney general did not follow proper procedure when the subpoena was issued, and did not properly deliver it to Commerce. A subpoena must be delivered by someone not involved in the matter, but Burnes said Coakley had one of her investigators deliver it.
Beyond the technicalities, the commissioner also said Coakley had no right to seek information using a subpoena because Burnes had already ruled that the attorney general would not have the right to discovery, a legal term for the ability to investigate records.
"The attorney general is using its subpoena as a discovery tool," she wrote. Burnes also sided with Commerce's lawyer, who called Coakley's efforts "an outrageous abuse of power."
A Commerce vice president did not return calls seeking comment.
Commerce is one of several auto insurance companies that sought to maintain the status quo, in which rates are set by regulators. But Burnes's ruling, which limits the power of the attorney general to get information from insurers, could help the transition to competition.
"Our goal in calling for hearings on Commerce's and other insurers' rate filings was to bring transparency to the rate-setting process under the new managed competition system," Coakley said in a statement. "We are very concerned that our office's inability to acquire appropriate information is likely to render the hearings ineffective and does a disservice to consumers."
A lawyer representing auto insurers who favor the move to competition hailed the action.
"This is the commissioner saying she is setting the ground rules and there isn't going to be a prolonged legal proceeding," said Peter Robertson, an attorney for Fairness for Good Drivers, a coalition of insurers. "We're going to get to the nub of this, which is whether Commerce's rates are too high or not."
Robertson added, "She is a smart judge and she's acting like a judge."
Auto insurers late last year filed their proposed rates for 2008 to the Division of Insurance, and were given a chance to amend their submissions. Commerce sought a rate reduction of 6 percent each time. Coakley contends that the former, highly regulated system would have resulted in a reduction of at least 10 percent. She also said the average rates filed by insurance companies are potentially misleading.
"Within a given insurer's rating plan, some consumers may see significant savings," Coakley's staff wrote in a December bulletin on the transition to managed competition. "Others, however, will not and may face up to 10 percent increases."
In addition to Commerce, companies that have been called to defend their proposed rates are Arbella Mutual Insurance Co., Safety Insurance Co., Premier Insurance Co. of Massachusetts, and Hanover Insurance Group. Those hearings will be held later this month.
Separately, Burnes said she had approved rates filed by four additional auto insurers, bringing the total number of accepted rates to 14. "With each managed competition rate we accept, we take one step closer to bringing better prices and products to all of the good drivers in Massachusetts," said Burnes in a statement. "The rates on file have withstood the division's extensive review process and mark the beginning of a new era of consumer savings and consumer choice in the state's auto insurance market."
Jeffrey Krasner can be reached at krasner@globe.com.
