SACRAMENTO, Calif.—California Insurance Commissioner Steve Poizner filed a lawsuit Tuesday challenging a determination by the California Office of Administrative Law that he improperly tried to stop insurers from investing in Iran.

Last month the OAL, in a nonbinding ruling, agreed with a group of insurance organizations that Mr. Poizner did not follow proper procedure in calling for insurers to divest themselves of investments in 50 companies that conduct business in Iran. In February, Mr. Poizner released a list of the companies he said do business in the Iranian oil, natural gas, nuclear and defense sectors.

“I intend to ensure that any insurance company licensed in California is not doing business, in any way, with the Iranian regime,” Mr. Poizner said in a statement. “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.”

The lawsuit, which was filed in state Superior Court in Los Angeles, calls for the OAL to determine that the actions taken by the commissioner and the insurance department did not constitute impermissible “underground” regulations.

The organizations that asked the OAL to rule on the issue said in a statement last week in response to Mr. Poizner's lawsuit: “Our associations do not support or defend any insurer that makes investments that violate state or federal law, which prohibit investments in Iran and other terrorist regimes. We asked the OAL for a determination simply to resolve the issue of the Department of Insurance's compliance with (California's Administrative Procedure Act).”

The five organizations are the Assn. of California Life and Health Insurance Cos., the Assn. of California Insurance Cos., the American Insurance Assn., the American Council of Life Insurers and the Personal Insurance Federation of California.

OAL Director Susan Lapsley said in a statement Tuesday: “No state agency, including the Department of Insurance, is exempt from the APA's requirements absent an express statutory exemption.” The statement said the commissioner did not follow the required process, “but rather simply imposed new rules unilaterally without any public input or comment. This is exactly the type of action the APA is designed to prevent.”