Applied Underwriters’ / CIC Rehabilitation Plan Pushed Back Again

The public release date for conserved California Insurance Company’s proposed rehabilitation plan has been pushed out several more weeks. CIC management had stopped negotiations and sued, but now, spurred on by CIC’s repeated losses in court, negotiations continue.

CIC is an operating affiliate of Applied Underwriters’ and the carrier in which Applied placed coverage under illegal contracts.

The proposal is now due by October 19. The San Mateo Superior Court granted a joint request from the Conservation and Liquidation Office and Applied Underwriters for another two-week delay in the timeline.

“The discovery …was plainly fishing for evidence to support pre-conservation management’s legal theories in their Application to Vacate the Conservation Order.”  –– Attorney Cynthia Larsen

Discussions broke down earlier this year, but a stinging loss in court brought Applied Underwriters – California Insurance Company’s pre-conservation management team – back to the negotiating table. Repeated failures in court since appear to be keeping those talks going. The latest loss came as the San Mateo court ruled against CIC and quashed its effort to harass the California Department of Insurance with extensive discovery requests.

“The discovery—full of demands for testimony and evidence about the pre-conservation Form A process, the bases for the Commissioner’s Application for the Conservation Order, and the New Mexico hearing in which pre-conservation management claims the Commissioner’ consented’ by silence to CIC’s merger and departure from California—was plainly fishing for evidence to support pre-conservation management’s legal theories in their Application to Vacate the Conservation Order,” attorney Cynthia Larsen representing the Conservation office noted in a brief to the court on behalf of the CLO. “[A]s the requests came just over a week after the Conservator had filed his motion to set the schedule for filing, briefing, and hearing his forthcoming rehabilitation plan, grounds for the Court to deny the Procedural Motion.”

The court denied that motion to vacate after it rejected a last-minute request to delay the hearing. The request to delay came after the court issued its tentative ruling indicating that it was inclined to reject CIC’s bid (for past coverage see Motion to Vacate…).

Plan In The Works

CLO initially indicated that it would file a proposed rehabilitation plan by the end of August. After negotiations resumed between CIC and the Department, the court agreed to delay the filing date by two-weeks and then agreed to push the date back another three weeks at the parties’ request.  The new stipulated date is October 19, as negotiations over a “consensual rehabilitation agreement” continue.

Prior to the negotiations’ resumption, CLO was moving unilaterally to craft a rehabilitation plan to wrap up the carrier’s nearly 11-month conservation. That may still prove to be the case. CDI forced the company into conservation last November after CIC management attempted an end-run around CDI’s oversight authority by seeking to merge the carrier into a newly formed company domiciled in New Mexico.

 Get Out of California

Under CLO’s unilateral move, the rehabilitation plan was expected to call for CIC to surrender its certificate of authority and to exit the California market. It is unknown at this time if the Department’s deal will include the surrender of Applied Underwriters’ certificate as well since the management is the same.

One of the issues is the amount of cash the carrier will be required to leave on deposit in California to cover its potential losses.

If any, what provisions are in the final proposal should be known by  mid-October. Under the new timeline, interested parties will be able to comment on the proposal by mid-December, and the court contemplates a hearing on the plan in mid-March 2021.

As with all things Applied Underwriters’ the CIC litigation is expected by most people we ask to be long and contentious.