The Saga Continues …

Applied Underwriters’ / CIC Tries for Better Results in Different Courts

Applied Underwriters’ and its California Insurance Company affiliate haven’t responded in San Mateo County Superior Court to the state’s rehabilitation plan. In keeping with its scorched earth litigation strategy, as CDI mentioned in its documents, the embattled company is now attempting another end-run – this time by looking to different courts to block CDI.

Applied filed a federal action to end the Conservation and Liquidation Office’s conservation order a day after CLO revealed its plan. Applied now follows that up with an anti-SLAPP motion in state court claiming the California Department of Insurance is trying to deprive CIC of its First Amendment rights.

The federal action comes nearly a year after the California Department filed for and obtained court approval to wrest partial control of the carrier away from Applied to preserve California policyholders’ assets. Applied attempted an end-run around the Department’s oversight authority.

CDI has filed a proposed rehabilitation plan which calls for Applied/CIC to exit the state, but only after transferring its California policies and liabilities to another carrier and resolving the many lawsuits it has with California employers (for past coverage of the controversies, see Applied Underwriters Investigations…).

Applied filed another action just days before the rehabilitation plan was released in a failed attempt to keep the plan out of the public eye. Applied requested a stay, but it was rejected by the court immediately and without comment.

The state court of appeal action was Applied’s second failed attempt to block the release of CLO’s rehabilitation plan. Applied suffered a similar defeat this summer when San Mateo Superior Court Judge George Miram refused to stop the public disclosure. Miram also issued an order denying Applied’s motion to vacate the conservation order, which it is now asking the state appeals court to set aside.


Court Shopping the Federal Action

Applied’s federal case seeks the same relief it has pursued in state court to no avail – the end of the conservation order. The filing rehashes many of the arguments that Applied has made in the state court actions. Not all of them, according to the other side, are made with complete veracity.

The complaint alleges that the California Department of Insurance and Insurance Commissioner Ricardo Lara seeks to harm Applied with the rehabilitation plan. In particular, Applied aims at the litigation settlement procedures outlined in the plan to resolve the dozens of pending cases tied to its EquityComp and SolutionOne programs and its illegal reinsurance participation agreement (RPA).

CDI says it included the settlement provisions to end Applied’s “scorched earth” litigation tactics that drive up policyholders’ costs. The plan consists of three options for resolving the cases and would be available to policyholders in active litigation as well as those who believe they have a claim but are not currently in litigation.

Applied alleges that CDI is violating its constitutional right to due process by obtaining the conservation order “premised on knowingly false pretenses, misrepresentations and omissions of material fact.” CDI contends it is protecting California policyholders.

Applied also alleges an unlawful taking of its property. It contends CDI is violating section 1983 by depriving plaintiffs of their First Amendment rights to criticize public officials and petition the government.

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.