The Ninth Circuit Court of Appeal issued a terse order denying a request for rehearing filed by Applied Underwriters and its hastily created New Mexico subsidiary. The request and denial follow the Ninth Circuit’s earlier dismissal of two lawsuits challenging Insurance Commissioner Ricardo Lara’s conservation of the California-domiciled California Insurance Company.
The court found the cases redundant as the same people control all the entities.
“The panel unanimously votes to deny the petition for panel rehearing. Judges Berzon and Bea recommend denying the petition for rehearing en banc. Judge Nguyen votes to deny the petition for rehearing en banc,” the court wrote in the order denying the petition. “The full court has been advised of the petition for rehearing en banc, and no judge has requested a vote on whether to rehear the matter en banc.”
The order derails Applied’s ongoing attempts to end the conservation of CIC, which remains under the exclusive jurisdiction of the San Mateo Superior Court that issued the November 2019 conservation order. The courts have consistently held that the state’s takeover and conservation of CIC was a legitimate response to Applied’s attempted end-run around the Commissioner’s oversight authority.
“As previously noted, the conservatorship action was brought for a legitimate reason – indeed, Appellants’ own factual allegations make out a violation of Section 1215.2(d) sufficient to trigger a conservatorship under Section 1011(c),” the Ninth Circuit wrote earlier this year in rejecting the case. “The allegations make clear that Appellants neither sought nor received approval from CDI for the proposed purchase of the controlling interest in CIC I and the concomitant CIC I/CIC II merger, as required by California Insurance Code Section 1215.2(d), and that the merger was an obvious attempt to avoid the California insurance regulatory regime.”
The Federal Circut appears to be losing its patience with Applied’s continued scorched earth litigation style.
The state conservation action remains mired in court, with a hearing on the rehabilitation plan pushed back until next February. The plan proposes requiring Applied to sell CIC’s California portfolio to another carrier and calls for a litigation resolution process to handle the pending EquityComp lawsuits with three options for policyholders to end the disputes.