Industry calls are increasing for Insurance Commissioner Dave Jones to act and make its decision regarding the Applied Underwriters’ EquityComp program applicable to all California employers – not just the employer that brought the successful case.
The decision in the Shasta Linen case found that the key document in the program, it’s “Reinsurance Participation Agreement” (RPA), has not been filed and approved and is, therefore, unlawful, void, and unenforceable because it is an unfiled collateral agreement.
Attorney Larry Lichtenegger in a three-page letter outlined his reasons. Lichtenegger has filed the most cases against Applied Underwriters’ and is considered the most knowledgeable in its programs. He defended both California’s employers and brokers.
“This letter is to request that the Department of Insurance designate as a precedent decision portions of the Department’s January 21, 2016 … This is an urgent request because the same issue is pending in many cases statewide,” says Lichtenegger. “[W]ithout the decision being declared as precedential, these insured’s will be confronted with continuous efforts in every forum by Applied Underwriters to disprove what the Department has already found.”
Lichtenegger also defends the position California brokers find themselves in “… there are also hundreds of brokers in California who remain confused as to the legality of the RPA because they are getting one message from we lawyers and the media and another from Applied Underwriters itself. They too deserve a clear and specific understanding that the RPA is an unfiled and unapproved agreement, and it is, therefore, unlawful for Applied to sell it.”
What the Department found is that the RPA agreement is a collateral agreement and needs to be filed for approval before use. Applied never filed the RPA used for Shasta or the other employers in dispute with the Berkshire Hathaway (NYSE: BRK.A) subsidiary.
Normally departmental appeal decisions are applicable only to the parties involved in that particular case, whereas decisions designated precedential are generally applicable. The Department notes that “the policies and holdings in these [precedential] decisions can be relied upon by parties to current cases, cited in their briefs and also relied upon by the Administrative Law Judge in making a proposed decision.”
Lichtenegger maintains that the decision is ripe for such a designation as the same factors apply to all EquityComp subscribers. “This is not an issue of each insured having something different in their RPA than exists in the Shasta case…each of the demarked reasons contained in the Shasta decision as to why the RPA changes the terms of the guaranteed cost policy and why it was required to be filed with the Department and Bureau exist in each and every one of the cases we have reviewed,” he notes.
The decision is still in its proposed format as both sides – Applied and the employer – are seeking a rehearing of the decision. Applied / California Insurance Company is asking the Commissioner to reverse the findings in the proposed decision completely and to dismiss the case. The carrier’s reasoning is based mostly on arguments already raised in the case that were already heard and rejected by the Administrative Law Judge and Commissioner Jones.
Shasta Linen is seeking a rehearing only of the portion of the decision regarding its remedies, which the Department said wasn’t briefed entirely, and is also asking Jones to make his findings on the illegality of the RPA precedential.
The Department is still considering its next step in the process.
If you want to address the issue of making the decision precedential the commissioner’s address is:
Hon. David Jones, Commissioner
California Department of Insurance
300 Capital Mall Seventeenth Floor
Sacramento, CA 95814
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.