Party To CIC Rehabilitation Seeks Costs, 10% Interest Award

The attorney for a former California Insurance Company insured is again trying to get a San Mateo County court to require Applied Underwriters to pay 10% interest on any money employers receive under the rehabilitation plan’s settlement provisions. He also wants attorney fees and costs. The attorney made the same request during the rehabilitation plan hearing last August, but Judge Susan Greenberg opted not to include the remedies in her final decision.

Attorney Phil Walker, representing Environment Control in the proceedings as a party-in-interest, filed the motion for reconsideration again requesting these remedies. The motion is untimely, but he says it was outside his control as the notice of entry of judgment was sent to an address he has not used for nearly five years. As such, he argues, the Notice of Entry of Judgment and the Final Statement was never served on him or his client. It is unknown if he kept the Court informed about his address change.

The rehabilitation plan’s settlement provisions include interest on recoveries, but the rate is less than 3% compared to Walker’s request of 10%. Ten percent per annum interest is the standard rate for a money judgment in California courts under section 685.010 of California’s code of civil procedure.

Not everyone thinks Walker’s request is a good idea. Applied Underwriters has a reputation for scorched earth litigation, and the general thinking among lawyers in the case is that, given Applied Underwriters’ penchant for such litigation, such a motion, if granted, will lead to years more of litigation.

Attorney Larry Lichtenegger represents the majority of the former CIC insureds. He sums up the consensus, noting after Walker’s initial request at the rehabilitation plan hearing that while he is supportive of higher interest rates, he is leery of starting fights for attorney fees and costs. Adding an attorney fee component would just perpetuate more litigation, he says. The result would be to further delay the resolution of the cases and of the conservation in general.

Walker’s motion says “The Commissioner/Conservator’s refusal to follow the law of California – i.e. that the legal interest rate of interest to be applied by California courts is 10% – is contrary to specific statute, improperly discriminatory against the policyholders, is not reasonably related to the public interest as it fails to follow the public policy of enforcing California law on legal interest rate, not supported by a rational basis as it fails to follow California law, and is a breach of the fiduciary duty to the policyholders by failing to make them ‘whole’ in light of their being overcharged premium by California Insurance Company.” “The Commissioner fails to provide any explanation of how the 2.7% interest rate he included in the Rehabilitation Plan satisfies any of the criteria listed above as the standard of review.”

Fees and Costs

Walker also reiterates his request that the settlement allow parties to recover attorney fees and costs associated with the legal action.

“Protecting the policyholders means making them whole. The policyholders are not protected if they lose hundreds of thousands of dollars in attorney fees and costs expended to recover from CIC as the result of implementation of a Rehabilitation plan,” Walker wrote. “The attorney fees and costs are expenses they would have never incurred if California Insurance Company had not engaged in its unlawful actions in over-reserving and overpaying claims and wrongfully failing to reimburse overpaid premiums. Further, this is an expense they would never have had to pay if the Commissioner had overseen California Insurance Company to ensure that policyholders were protected by legal actions of a carrier. The Commissioner did not do that.”

The Department’s proposed statement of decision and tentative order did not address Walker’s request for higher interest rates or the issue of attorney fees and costs. In adopting the Department’s proposal, Judge Greenberg also avoided the issue.

“[T]here is no determination by this Court on those 2 issues despite their having been placed squarely before this Court by oral argument of Counsel for Environment Control at hearing on 8/23/23, Environment Control’s subsequent correspondence to the Court, Environment Control’s forwarding a Proposed Order on these issues, and the raising of the reimbursement of policyholder attorney fees and costs with interest, by Policyholder Star Concrete at the hearing,” Walker wrote. “Therefore, Movant Environment Control requests reconsideration of the Final Statement and issuance of an Amended Final Statement awarding 10% legal interest on restitution to the policyholders and reimbursement of their attorney fees and costs in this matter.”

Judge Greenberg set an August 1 hearing on Walker’s motion.