Applied Underwriters Inc. and the State of California continue their dispute over California Insurance Co., a subsidiary of Applied that allegedly tried to relocate to New Mexico without approval after Berkshire Hathaway Inc. sold off the workers' compensation insurer.  On Tuesday, Applied Underwriters filed a lawsuit against the State of California and its insurance commissioner – a day after the state insurance department filed a memo with the San Mateo Superior Court requesting approval of its rehabilitation plan for the besieged CIC.  Omaha, Nebraska-based Applied Underwriters has had a tumultuous year, beginning with Berkshire Hathaway's announcement on October 1
A few days later, California's Insurance Department refused to approve the sale of CIC on the grounds that Applied was attempting to redomiculate CIC in New Mexico without approval and in violation of California law. Applied said in a statement that its move to New Mexico was a result of the California Department of Insurance's ineffective review process, which lasted eight months, and that the CDI had not approved or disapproved of the transaction until after the deadline.
On November 4, 2019, the CDI was appointed curator of the CIC by a judge of the San Mateo Superior Court.
In Applied Underwriter & # 39 ;s complaint, filed in the U.S. District Court for the Eastern District of California, the insurer claims that Insurance Commissioner Ricardo Lara and others placed CIC in a conservatory under false pretenses and claims that the CDI has a "vendetta" against Applied and has "illegally tried to gain and exercise power over the CIC as a means of overriding the court's decision and punishing the CIC" after it attempted housing in New Mexico. The complaint further alleges that there is no valid ground for CIC conservatism because the proposed merger did not pose a risk to California policyholders … due to CIC's significant capital, surplus and deposits.
The trial seeks a decision declaring the actions of the Insurance Commissioner illegal and ordering the CDI's conservatory for the CIC.
Both applied insurers and the CDI said they made good efforts to negotiate a rehabilitation plan before preservation but failed to agree.
In his statement in support of the rehabilitation plan, Joseph Holloway, the conservator appointed to oversee the day-to-day operation of the CIC by the CDI in November, the insurer violated the terms of the court's preservation decision in March 2020 when it made a $ 20 million unsecured loan to applied insurers without prior notice and permission from CDI. or himself.
Mr. Holloway's rehabilitation plan would require CIC to transfer its business book to another California-approved insurance company and provide policyholders with a reasonable opportunity to resolve their claims related to Applied's SolutionsOne and EquityComp programs.
While the plan would allow CIC subsidiary Continental Indemnity Co. , an insurer approved in California, to take over its portfolio, Holloway said that given CIC's "regulatory breaches related to the conservation measure" that Continental would not be in the policyholders' best interests unless the insurer agreed to enter into a claims administration agreement with an independent third-party administrator appointed by the conservator. Following the completion of the terms of the plan, CIC would then relinquish its California authority certificate and will merge into a subsidiary in New Mexico, according to the court document.
The Rehabilitation Plan hearing is scheduled in San Mateo Superior Court on March 4, 2021.
This fight with California is not Applied's first. In 2017, CDI accused CIC and another Applied subsidiary, Applied Underwriters Captive Risk Assurance Co., of using "bait and gear" marketing methods to compensate workers. The insurer has also been involved in disputes in New Jersey, New York and Vermont, with insurers pleading with the insurer to sell compensation schemes to unapproved workers.