Letter to New York State Insurance Superintendent Eric Dinallo

Eric R. Dinallo
Superintendent of Insurance
New York State Insurance Department
25 Beaver Street
New York, NY 10004

April 20, 2009

Dear Superintendent Dinallo:

It appears that you are abusing your power. You should stop.  

As you know, Allstate Corporation’s CEO, Tom Wilson, wrote a New York Times op-ed on April 15, 2009 in which he argued for federal regulation of insurance companies. In close proximity to the publication of that op-ed, you announced an inquiry into Allstate based upon Mr. Wilson’s statement that Allstate “played only a small role in unregulated insurance markets.” You claimed at the time that you believed Allstate had violated New York State regulations through these transactions.  

You know or ought to know that the interconnectedness of all financial markets means that anybody involved in issuing or purchasing debt instruments—things that almost all insurers do—played a “small role” in unregulated insurance markets. It seems that Mr. Wilson’s statement was simply an acknowledgement of lawful business practices that are already common knowledge. Thus it appears that you are opening an inquiry under false pretenses.

There is reason to believe that your real agenda may be to stop insurers, particularly large companies like Allstate, from calling for federal regulation of the insurance industry – something that may diminish your authority over such companies. It is widely known that your employees have made telephone calls to other insurers operating in New York State asking them to back off of efforts to promote federal regulation of insurance. Thus, it appears rather certain that your real agenda has little or nothing to do with your publicly expressed motives.  

There is strong reason to believe that your actions also violate the law. In the 2000 case White v. Lee, 227 F.3d 1214, the U.S. Court of Appeals for the 9th Circuit found that government officials violated the first amendment rights of individuals who opposed a new housing development in their neighborhood by investigating them. The individuals opposed plans to open a group home for the mentally ill, protesting and successfully delaying its creation. In response, federal and local government entities then proceeded to investigate them for violation of federal fair housing laws. The court found, in essence, that government officials cannot launch investigations solely for the purpose of chilling speech. That’s what it appears you are trying to do.

Courts have also found that “a close temporal relationship between . . . participation in a protected activity and . . .  adverse action is alone sufficient to establish” retaliation (Parrish v. Sollecito, 258 F. Supp.2d 264, 268 (S.D.N.Y. 2003). In fact, the federal appeals court with jurisdiction over you has emphasized that “proof of the causal connection can be established indirectly by showing that the protected activity was closely followed in time by the adverse action.”  Quinn v. GreenTree Credit, 159 F.3d 759, 760 (2d Cir. 1998) (“because Quinn’s discharge came less than two months after she filed a complaint with Green Tree management and just ten days after she filed a complaint with the DHR, [a] prima facie case [of retaliation] is shown). Likewise, in Grant v. Bethlehem Steel Corp., 622 F.2d 43, 46 (1980), the Second Circuit found that “proof of causal connection can be established indirectly by showing that protected activity is followed by discriminatory treatment."

Your actions raise the specter of illegality and we hope that some of the companies that you have taken to harassing will do the right thing and file a lawsuit against you and your department. We disagree with Allstate’s call for mandatory federal chartering and disagree with the company on a wide range of other issues.

Even if it is not illegal, indeed, your blatant retaliation is morally questionable and challenges the bedrock principles of our democracy. You should withdraw your threat to investigate Allstate and stop your efforts to intimidate other insurers into backing off on calls for federal regulation.

Yours truly,

Eli Lehrer
Senior Fellow
The Competitive Enterprise Institute

Hans Bader
Counsel for Special Projects
The Competitive Enterprise Institute