Flash Report: Court Rejects Applied Underwriters Stay Request

(CORRECTION – THIS CORRECTS AND REPLACES TODAYS EARLIER FLASH)

A Los Angeles Superior Court judge yesterday – for the second time – roundly rejected Applied Underwriters’ request to stay Commissioner Jones’ Cease and Desist Order that prevents it from selling the EquityComp program and from applying post active term Loss Development Factors. Monday’s Flash showed the company continues to use those LDFs.

FLASH: COURT REJECTS APPLIED UNDERWRITERS STAY REQUEST

A Los Angeles Superior Court judge yesterday rejected Applied Underwriter’s arguments that it is suffering irreparable harm as a result of Insurance Commissioner Dave Jones’ administrative order in the Shasta Linen case. The court refused Applied’s request to stay the administrative order.

A separate cease and desist order that prevents the Applied from selling its EquityComp program and from applying post active term Loss Development Factors also remains in effect. Monday’s Flash showed the company continues to use those LDFs.

The Court had previously reached the same conclusion, denying the stay, in its tentative ruling. But it gave Applied Underwriters’ another bite at the apple, as they say, which in the end, appears to have made a better record for the California Department.

The Department declared Applied Underwriters’ reinsurance participation agreement (RPA) void and unenforceable in the Shasta linen case, and then made the case precedential.

…any harm Applied is suffering is self-inflicted by its own decisions and actions. — California Deputy Attorney General Brian Wesley

Applied Underwriters’ argued that it is suffering irreparable harm as a result of Insurance Commissioner Dave Jones’ administrative order in the Shasta Linen case and that brokers have been driven away from selling its products.

The court refused to issue a stay in the case meaning the Commissioner’s orders will remain in effect while the Berkshire Hathaway subsidiary challenges the overall validity of the Department’s action. Experts say it will take years to wind its way through the appellate court system and even then rarely do the courts rule against regulators administrative decisions.

Applied pleaded for a stay in the case claiming that it is losing business and is being portrayed in a bad light in the media coverage of its many disputes. California Deputy Attorney General Brian Wesley made the convincing argument that any harm Applied is suffering is self-inflicted by its own decisions and actions.

Wesley noted that Applied voluntarily entered into a cease and desist order that bars it from selling workers’ comp products with the controversial RPA which generated doubt in the market about the viability of the programs. “Self-inflicted harm does not qualify as irreparable harm,” he told the court.

The court entirely agreed.

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