The court-appointed Conservator overseeing California Insurance Company’s operations and rehabilitation says it racked up bills totaling nearly $1.3M in the six months between December 2022 and May 2023. In total, it has spent over $12 million on the conservation. The Conservator is asking the San Mateo Superior Court to approve reimbursement from CIC’s coffers.
The request is the fifth time the Conservator has gone to court to recover its costs, fees, and expenses, and it will not be the last. CIC and Applied Underwriters opposed the first request and lost. It did not oppose three subsequent motions, nor has it opposed this one.
Applied’s Scorched Earth Style
The court, in an earlier ruling on costs, noted that the high price tags “reflect the heavily litigated nature of this conservatorship.” Additionally, the court noted that CIC and Applied can hardly be surprised by how much the Conservator has spent on outside counsel in light of CIC’s “vigorous defense in this litigation.”
The Conservator’s latest costs and expenses were incurred analyzing CIC’s brief opposing the rehabilitation plan and its supporting documents that included a 46-page memorandum, nine declarations, and over 1,300 pages of exhibits. The Conservator also incurred costs preparing for the rehabilitation plan application hearing, continuing to supervise CIC’s operations, and monitoring the numerous lawsuits pending against CIC over its illegal reinsurance participation agreement.
Insurance Commissioner Ricardo Lara received court approval to take control of CIC away from Applied Underwriters’ on November 4, 2019. Applied Underwriters’ was attempting to escape California regulation and remove CIC’s assets from the state by merging CIC into a hastily created carrier in New Mexico without California’s approval.
The seizure also followed a series of investigative stories and a webcast on the Applied Underwriters’ Equity Comp Program by Workers’ Comp Executive dating back to 2015. Applied sued Workers’ Comp Executive, attempting to get a restraining order to stop the webcast but failed, and the webcast went on. Applied continued to pursue a trademark case but ultimately lost in the Ninth circuit.
The latest filing will bring the total cost of the now four-year-old conservation proceeding to $12,151,288, through May of this year. The actual rehabilitation hearing was held in two parts in August and September, followed by weeks of outside counsel’s time to draft the order adopting the court’s tentative order and approving the rehabilitation plan. The court is expected to approve the rehabilitation plan later this month, but various parties do not expect the litigation to end there.
The San Mateo Superior Court is scheduled to review the Conservator’s motion for reimbursement at a January hearing.