Flash Report: CDI Judge Rejects Lara Pressure in Applied Underwriters’ Case

California Insurance Commissioner Ricardo Lara or his special counsel have for the second time refused to adopt an administrative law judge’s (ALJ) decision that is widely seen as averse to Applied Underwriters’ and its related carrier California Insurance Company.  But the judge on the case is refusing to back down and change his legal position. In the second notice of non-adoption, counsel Bryant Henley ordered the judge to make a finding but ALJ Clarke de Maigret refused saying such an act is beyond his authority.

The case involves Van de Pol Enterprises and its time in Applied Underwriters’ illegal EquityComp program.  It is another step in the continuing saga of the Commissioner who may have been bought.

Henley is signing the non-adoption orders in Lara’s stead after the Commissioner announced that he recused himself from deciding matters involving Applied Underwriters’ due to the on-going scandals. Specifically, Henley is ordering the ALJ “to make a finding regarding whether the guaranteed cost policies are valid or enforceable.” The guaranteed cost policies in question were the policies issued by California Insurance Company – but not ordered by Van de Pol – as part of the EquityComp program.

De Maigret maintains in order to find the CIC policy enforceable he would have to resolve the numerous common law allegations of fraud and breach of good faith and fair dealing that are pending against Applied in a San Joaquin County Superior Court.

The ALJ says the California Supreme Court found those issues to be outside the Commissioner’s jurisdiction. “Consequently, neither the ALJ nor the Commissioner has the authority to find the guaranteed cost policies valid or enforceable, and the ALJ cannot take additional evidence on that question,” de Maigret ruled.

“What the Commissioner (or his designee, the Deputy Commissioner & Special Counsel) seeks is a legal conclusion from the ALJ regarding the validity and enforceability of the guaranteed cost policies – a ruling the ALJ cannot make,” de Maigret wrote in response. “As the Amended Proposed Decision indicates, the Commissioner’s jurisdiction is limited to allegations under the Insurance Code and related regulations. But conformance to the Insurance Code and regulations does not render a policy valid and enforceable.”

The ALJ says he will issue a second amended proposed decision in the case but is planning to stick to his position. “Other than updating the procedural history of this case, the Second Amended Proposed Decision will be identical to the Amended Proposed Decision,” de Maigret notes (for past coverage see ALJ Rejects..).

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