Commissioner Steve Poizner filed the lawsuit in reaction to a ruling Oct. 18 by the state's Office of Administrative Law that the commissioner had not followed the proper procedures in issuing a rule barring insurer investment in Iran.

Commissioner Poizner leaves office Jan. 3. and Mr. Brown becomes governor at that time, according to Mr. Sorich.

Commissioner Poizner wants to stop insurers from investing in about 50 companies that do business in Iran.

Of the 1,300 insurers licensed to do business in California, about 340 hold investments in companies on the list. Those investments total approximately $6 billion.

Mr. Sorich said that the investments at issue constituted less than 1 percent of California insurance company investments.

But the issue is two-fold, he said.

First, he said, California insurers strongly believe the Insurance Department must follow an administrative ruling in undertaking such actions.

Second, he said, his group believes that the department is acting arbitrarily in barring these investments on a blanket basis.

Mr. Sorich said that the Association of California Insurance Companies–which had sought the administrative law ruling along with several other insurance trade groups in California–had been named in Commissioner Poizner's lawsuit.

It was filed in Los Angeles Superior Court today, he said.

The administrative ruling was requested by the insurance industry, but is non-binding.

The Office of Administrative Law said that Commissioner Poizner's rule was a regulation and therefore subject to the state's Administrative Procedure Act.

Because the rule was a formal regulation, the department should have gone through a formal rulemaking process, the Office of Administrative Law said.

Commissioner Poizner's lawsuit challenges the administrative analysis of this procedural issue.

He added in a statement that the lawsuit "seeks to clarify his authority to address the critical issue of insurer support of the Iranian terror regime and the solvency of insurer investment portfolios."

In filing the suit, Commissioner Poizner said he is doing so to ensure that any insurance company licensed in California is not doing business, in any way, with the Iranian regime.

"Insurance premium dollars that Californians pay should not end up supporting a regime that has shown time and time again its disregard for the concerns of the global community," Commissioner Poizner said.

"The consensus is clear, as seen in the sanctions that the United Nations, the European Union, the U.S. government, and the California Legislature have imposed over the past two years–responsible businesses should not be doing business with Iran," he said in his statement.

"Since companies doing business with Iran face financial risk, I have the authority to protect insurer portfolios from investments in those companies," he charged.