References to ice cream and red herrings peppered oral arguments before an appeals court Thursday as State Farm and Florida regulators squared off on whether the company should be allowed to hide as a trade secret information routinely made public for years.
At issue is data virtually every other company in the state provides about how many home insurance customers it has — or is canceling. That information goes dark to the public if a lower-court ruling stands and competitors follow suit.
“A company cannot claim trade secret for something that is not new,” said Elenita Gomez, representing the Florida Office of Insurance Regulation.
But State Farm’s lawyer told a three-judge panel at the First District Court of Appeal in Tallahassee the quarterly data is like a new “ice cream flavor” that has economic value. The company says it wants to avoid revealing its marketing strategy to competitors.
“It is of value to State Farm’s auto insurance business,” attorney Karen Walker said, noting many customers want to buy home and car policies from the same place.
The appeals panel is considering whether to uphold a ruling that State Farm can hide information submitted to the state’s Quarterly and Supplemental Reporting System (QUASR). The system lags close to half a year behind real time, but shows how many policies a company has statewide and in individual counties, and how many policies it has canceled or not renewed in each three-month period.
In the case initially filed in 2014, the company maintains its “associates spent valuable time and resources to determine how to best re-enter the market and have gone to great expense to develop its plans for identifying and rating risks.” It took its data off the public grid and went to court to protect the trade-secret status it declared.
But a wall of secrecy would also protect, say, a company that did not want the public to know about how many home insurance customers it was dropping as it tried to hold on to its car business. Trust matters a lot in insurance. Insurers collectively spend billions of dollars on advertising to reassure customers they are in good hands or dealing with good neighbors.
Despite the fact State Farm said it was “re-entering” the Florida homeowner market, it dropped more than 40,000 customers, or more than 10 percent, in the year following that, The Palm Beach Post reported.
State Farm was once Florida’s largest property insurer but has shed about half a million homeowner policies in the past half dozen years, making it a leading actor in a major insurance crisis for the state.
Leon County Circuit Judge James Hankinson ruled in May that State Farm’s information met the definition of trade secret in state statute. Advocates saw scant consideration of a public or consumer interest in transparency or accountability in a regulated industry. Instead, the judge wrote that a disputed issue was “whether QUASR data has value. The court finds that there is value to the QUASR data.”
If that is all it takes to knock down a state system in use for many years, it points to ridiculously weak wording in the law, Birny Birnbaum, executive director of the Center for Economic Justice in Texas, said after the lower-court ruling.
“At best, it shows that demonstration of a trade secret is trivial and the overly broad trade secret exemption to public information laws undermines public accountability,” he said.