Flash Report: CDI’s Secret Deal With Applied Underwriters?

By: Brad Cain

Applied Underwriter’s fight with the California Department of Insurance over the legality of its EquityComp program and the integral but unfiled reinsurance participation agreement (RPA) may be coming to a close. CDI officials say they are unaware of any deal despite Court filings which say the Berkshire Hathaway (BRK.A) subsidiary and CDI have a settlement agreement hammered out. The court has a hearing set to dismiss the case.

The CDI declared the principal document Applied Underwriters’ was using in its EquityComp Program – the Reinsurance Participation Plan – void and unenforceanle, CDI went further and issued a cease and desist stopping Applied Underwriters’ from selling its program. Applied filed a Peremptory Writ of Administrative Mandamus challenging the CDI’s authority which is the case at hand.

A court hearing is scheduled that may soon shed more light on the deal unless it is canceled at the last minute as two previous dates have been. Regardless, a settlement that properly protects California insureds would not seem to be the sort of thing that regulators would want to keep quiet.

This has some concerned that CDI may back away from its position that California law requires the EquityComp forms and endorsements to be filed and approved before use. No public disclosure has been made as to the filed forms and endorsements. For the sake of accuracry, this does not mean they are not in process.

“There is not a settlement that I’m aware of at this point, if there was we would be putting something out there about it, but there is not a settlement that I’m aware of,” says Nancy Kincaid, press secretary for Insurance Commissioner Dave Jones. “I have nothing from legal on this case other than there’s no public information at this point.”

Attorneys close to the case at hand as well as others with on-going litigation against Applied are also being kept in the proverbial dark. The blanket of silence has attorney Larry Lichtenegger wondering “how badly the CDI sold us down the river.”

Attorneys for Shasta Linen, the employer at the heart of the original enforcement action, say they too are being kept in the dark. “No one is really telling us anything,” says attorney Craig Farmer. “It’s ridiculous that they don’t tell us what the situation is.”

Shasta is a Real Party in Interest to Applied’s case fighting CDI’s decision and order finding the EquityComp program to be illegal. CDI declared the RPA to be void and unenforceable because it was never filed nor approved. “I don’t know how they could have a settlement that ignores Shasta Linen,” adds Farmer. “It doesn’t make any sense.”


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.