The conservation court handling the rehabilitation of Applied Underwriters’ California Insurance Company says the state’s ongoing conservation action does not block a former insured’s attempt to collect the monies it was awarded through arbitration. The court says the judgment “should be paid immediately” but the employer will have to go to a federal court to collect on the five-year-old debt that, after interest, is now worth over $1 million.
San Mateo Superior Court Judge Nina Shapirshteyn adopted a tentative order granting in part Bayless Engineering’s motion for relief from the stay on litigation that went into effect when the state took over CIC in 2019. Earlier that year Bayless won a $550,093 arbitration award plus interest. The award amounted to the difference between what Bayless paid into the EquityComp program and what was due under the CIC guaranteed cost policy (for past coverage see Former Insured…).
“Since the Judgment was final before the Conservation and Restraining Order issued, this Court’s Conservation and Restraining Order does not restrain [Bayless] from collecting the Judgment,” the San Mateo court wrote. “Specifically, the injunction imposed in paragraph 17 of the Conservation and Restraining Order does not prevent payment of the Judgment, and the injunction imposed by Paragraph 27 of the Conservation and Restraining Order does not prohibit Movant from seeking a writ of execution or any other similar remedy to enforce and obtain payment of the Judgment, which has been final since September 16, 2019, and should be paid immediately.”
After Applied lost the arbitration with Bayless it moved to appeal and issued Bayless a supersedeas (appeal) bond. Applied Underwriters Captive Risk Assurance was the principal on the bond and CIC was the surety. Applied’s appeals failed and the Ninth Circuit Court of Appeal affirmed the award on September 16, 2019. The state’s conservation order that blocked most collection efforts against the Applied subsidiary was filed November 4, 2019, and California Insurance Company has been under conservation ever since.
While the San Mateo court notes that the debt should be paid immediately, it says enforcing payment is beyond its reach. “Issues as to whether the Supersedeas Bond is operative and how its conditions obtain should be determined in an action on the Bond, which the governing statutes place in the U.S. District Court for the Central District of California,” Judge Shapirshteyn wrote. Because the issue must go to the federal court, the judge also noted that she could not rule on Bayless’ request for attorney fees and costs.
The San Mateo court also rejected claims by California Insurance Company that the settlement provisions of the court-adopted rehabilitation plan – that CIC is appealing – apply to the dispute with Bayless. “This Court’s Final Statement of Decision and Order after Hearing 8-23-23 (entered on April 3, 2024) (the “Plan Order”) is currently on appeal, but the outcome of its appeal cannot affect the enforceability of the Judgment, which has been final and enforceable since September 16, 2019,” Judge Shapirshteyn held.