Attempting Another End-Run Around CDI? …

Applied Underwriters Asks Brokers to Write References to CDI

California brokers with clients covered by Applied Underwriters’ California Insurance Company either in the EquityComp program or the Solution one program tell Workers’ Comp Executive they are getting multiple calls telling them it will soon be moving CIC insureds to Continental Indemnity Company, another Applied Underwriters’ affiliate.

Interestingly, they are also getting calls from Applied’s Randy Jones, who is asking brokers to write reference letters to the California Department of Insurance indicating how great Applied is at managing claims, taking care of policyholders, and its producers. And as one broker pointedly quotes Mr. Jones to Workers’ Comp Executive, ‘that we are a stickler for the regs.’ Applied is asking for brokers to send the letter to it, not to CDI. Brokers should know that any such letters are likely to become a public record and either filed in Court or made a part of other Conservation and Liquidation Office public records.

Applied Underwriters’ asks for letters after filing so many lawsuits against insureds or by insureds against Applied. Many brokers have been sued for negligence. There are so many lawsuits remaining unsettled that it is an issue that they are settled in the conservation.

Brokers interested in writing directly to the CDI to express their unvarnished opinion about Applied and how it has treated its producers or insureds, or any other topic may write directly and confidentially to the Department’s lawyer:

Michael J. Strumwasser, Esq.
Strumwasser & Woocher, LLP
10940 Wilshire Blvd #2000
Los Angeles, California 90024

Letters may be submitted to the Department under the cloak of confidentiality by citing section Insurance code section 12919.

California Insurance Company is currently operating under a court’s conservation order under the control of the California Department of Insurance’s Conservation and Liquidation Office. It is finalizing a rehabilitation plan for the carrier before “kicking it the heck out of California,” as our tipster characterized the ultimate result.

Moving Carriers

In spite of Applied’s assertions, no switch of carriers has so far passed muster with the San Mateo Superior Court. No final rehab plan is yet approved – although hearings are scheduled on rehabilitation later this spring. reports there are only 746 active California Indemnity policies left for contractors in California.

The San Mateo court approved the state’s November 2019 takeover after Applied and CIC’s management team attempted an end-run around CDI’s oversight authority. Applied sought to merge the carrier with a newly created corporation in New Mexico without the Department’s approval.

At the Department’s request to protect California policyholders, the Court approved the state’s conservation request.

The CLO’s proposed rehabilitation plan contemplates the sale of whatever is left of CIC’s portfolio to another carrier as part of the surrender of CIC’s California certificate of authority.

CLO has made clear it will invite qualified insurers to bid to acquire any in-force CIC policies. The acquirer will also be assigned CIC’s rights under third-party reinsurance agreements.

The CLO says that only if there is no interest on the open market would it consider a deal with Continental Indemnity. And only then with concrete protections in place for policyholders.

 “The Conservator would allow this, but because of the history of CIC’s management’s sale of an illegal RPA, multiple attempts to evade regulatory authority, and the closing of the illegal acquisition of CIC and certain affiliates from Berkshire by Menzies, the Conservator has determined that it cannot protect California policyholders by simply shifting existing policies from CIC to another company with a different name run by the same officers,” CLO’s filing notes. “The Conservator, therefore, would require that if the successful applicant is an affiliate of CIC, it must contract for claims administration with an independent third-party administrator appointed by the Conservator.”

The rehabilitation plan also envisions a three-pronged settlement process for resolving the number of lawsuits between Applied and its California insureds.

However, no hearing has been held on CLO’s rehabilitation plan, and no open market bidding process has been held for CIC’s assets. All of this raises serious questions about Applied Underwriters’ statements that CIC’s book is moving to Continental Indemnity.

Applied Underwriters was once but is no longer an affiliate of Berkshire Hathaway. Applied’s management bought it. Berkshire Hathaway bears no responsibility for any of the events which have transpired involving Applied Underwriters’ or its subsidiaries including California Insurance Company.