Applied Underwriters’ and its subsidiary California Insurance Company lost its request for a Writ of Mandate. It asked California’s First District Court of Appeal for review of two orders issued by the San Mateo Superior Court in the CIC conservation.
All three Appellate justices concurred and signed the order. They did not think they needed a hearing.
Applied Underwriters filed the petition in October alleging that the lower court, which agreed to CDI’s conservation, committed legal error and abused its discretion. Applied Underwriters’ maintained that the lower court failed to hold a “full hearing” on its application to vacate the conservation order before rejecting it. The San Mateo Superior court refused to vacate after hearing the motion.
Applied Underwriters’ is known for its scorched earth litigation practices.
Applied argued in the petition that the initial basis for the conservation order no longer exists. The Department sought and received court approval to take over the carrier when Applied Underwriters attempted an end-run around the Commissioner’s authority by moving to merge California Insurance Company into a new New Mexico corporation without obtaining CDI’s consent. Applied argues that the Department actually consented either directly or by implication to the merger when it failed to voice an objection to the scheme while it was monitoring a hearing in New Mexico.
San Mateo Judge George Miram found the argument lacking and refused to lift the conservation order. “The Conservation Order simply ensures that Respondents do not again attempt to take CIC and its assets out of California without adequate protection of policyholders and the public,” he noted. So too, the First District in rejecting the petition.
The carrier also asked the appeals court to review Judge Miram’s order allowing the Conservation and Liquidation Office to file – which it already has – a proposed rehabilitation plan and to allow public comment on the proposals therein. Applied argued that the rehabilitation plan order “constitutes an abuse of discretion warranting writ of review because it afforded carte blanche to the Commissioner regarding his proposed third-party notice.”
Here too, the Court of Appeal rejected the proposal without comment.
The fight to keep the CLO’s proposed rehabilitation plan out of the public realm is moot at this point. The conservator filed its plan with the San Mateo Court last month, and its proposed terms – all 180 pages of them – are already public.
The proposal calls for the sale of CIC’s portfolio to another carrier. It proposes a litigation resolution process that gives policyholders three options for resolving disputes with Applied – including going to court.
At the end of the process, CIC will be required to surrender its California certificate of authority and exit the state. The filing documents numerous abuses by Applied against California employers and the Department itself and makes clear that the Department has had its fill of the company’s shenanigans.
Non-parties have until January 4 to file comments with the court in support or opposition to the rehabilitation plan. A formal hearing on the rehabilitation plan is scheduled for March 4, 2021.
Fined In Illinois
Applied Underwriters’ latest defeat in a California courtroom is not the only legal setback the carrier suffered recently. The Illinois Department of Insurance just issued a $250,000 fine against Applied Underwriters and its Continental Indemnity Company for “selling unapproved workers’ comp policies to small businesses.” Sound familiar?
The dust-up in Illinois is over the use of an unfiled and unapproved side agreement to the workers’ comp program it was selling small employers in that state. The side agreements in question are the reinsurance participation agreements (RPAs) issued by Applied Underwriters Captive Risk Assurance.
A market conduct exam revealed that AUCRA had issued 253 RPAs to Illinois insureds, and none were ever filed with the Illinois Director. The Department found that the way Applied packaged the RPAs with the guaranteed cost policy issued by Continental “mislead policyholders into assuming all of the risk, effectively insuring themselves. It resulted in policyholders paying more for the reinsurance part of the package than for the workers’ comp policy itself.”
To settle this and other violations discovered as part of the exam, Applied Underwriters agreed to pay a $253,000 fine. IDOI says that Applied is no longer selling the illegal program in Illinois and has agreed to file any new insurance products and rates with the Department as required by Illinois law.