Flash Report: Lara Continues To Intervene In Applied Underwriters’ Cases

By: Dale Debber and Brad Cain

Insurance Commissioner Ricardo Lara interceded in another dispute between Applied Underwriters and a California insured and again issued his own amended decision that is viewed as beneficial to the carrier.  Sources say the Commissioner’s unilateral order blocks the insured – RDR Builders – from potentially collecting $250,000 from Applied Underwriters and allows the carrier instead to collect an additional $250,000 from the insured. The disputes revolve around the Applied Underwriters’ EquityComp Program.

The new cases are consistent with the timeline and process in our previous story and could mean hundreds of millions of dollars for Applied Underwriters’ out of the pockets of California employers.

“It basically takes a quarter of a million dollars away from RDR and makes them pay an additional quarter of a million dollars,” says attorney Larry Lichtenegger who is representing RDR and numerous other former Applied insureds in cases before the California Department of Insurance. “It’s a half-million turnaround for Applied.”

Lichtenegger argues that Lara ordered reconsideration in the Oceanside after the statutory time limit had already passed. Secondly, he maintains that Section 2509.69(c) only allows the Insurance Commissioner to make “minor” changes to a proposed decision of an administrative law judge. “What the Commissioner did was change the result. That is not a minor change,” he writes.

The amended order after reconsideration came down yesterday. The order calls on Applied to recalculate RDR’s premium using the filed rates in the guaranteed cost California Insurance Company policy, which will result in RDR paying out additional premium. The original order did not provide for any additional payments from the insured and only allowed for refunds of any excessive payments made by RDR.

Earlier, Commissioner Lara issued an amended order with the same remedy seen as benefitting Applied in a dispute between Oceanside Laundry and Applied. Both actions overrule the administrative law judge that heard the case, and both follow the receipt of campaign contributions – some $53,000 – from individuals linked to Applied Underwriters who were not identified as such in official state filings made by Lara (for past coverage see Lara Took…).

The Berkshire Hathaway (NYSE: BRK.A) subsidiary is also in the process of being sold to Cayman Island-based United Insurance Company. That deal too must pass muster with the Department.

Oceanside Action Opposed

Lichtenegger says the reversal in the Oceanside Laundry case could be over a $600,000 turnaround in favor of Applied. He has filed an objection to the commissioner’s amended order in the Oceanside case claiming that Lara exceeded his statutory authority.

He says that Applied is using the amended decision in court proceedings to argue in court proceedings that “the Commissioner’s Decision in this matter is binding on all insured and all insured will all have to pay the guaranteed cost premiums. While we are confident that this was the objective of Applied in its recent contacts with the Commissioner, that is unacceptable to a majority of the insureds.”


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.