Flash Report: “Scathing” Court Order about Applied Underwriters / CIC / Equity Comp

In what one attorney close to the litigation called “perhaps the most scathing order I’ve ever seen against anyone,” San Mateo Superior Court Judge Susan Greenberg supported the California Department of Insurance Rehabilitation plan for California Insurance Company. That in a decision in the ongoing Applied Underwriters’ Equity Comp debacle. 

The order also supports a formulaic settlement plan for policyholders, many of whom have been in litigation with Applied over the Equity Comp Plan for years, including any who won settlements not yet paid by Applied. 

While the order is tentative, Judge Greenberg leaves little doubt that the tenor and content of the court’s final decision are not likely to change despite the expected challenges from Applied and CIC. The order is lengthy, contains findings of fact, and cuts the carrier’s management, even citing its outside attorney, Shand Stephens, of the law firm DLA Piper, for misrepresenting the facts in a cited document.  

Parties will be able to respond to Judge Susan Greenberg’s statement of decision and tentative order before a final order is issued.  

Attorneys were quick to congratulate attorney Michael Strumwasser, who represented the California Department, for his success in shepherding the case though, as one put it, “years of harassing litigation and accomplishing 100%—not 99%—but 100% of what he set out to accomplish.”  

Workers’ Comp Executive broke its first story about Applied Underwriters and its Equity Comp program in April 2015. It created a webcast with attorney Larry Lichtenegger explaining the math of the program and how it favored the carrier. Applied sued to stop the webcast and lost at every turn, all the way to the 9th Circuit. Workers’ Comp Executive Coverage ultimately led to the Department halting the policy issuance and forcing Applied to change its terms. 


The California Insurance Department filed for and obtained the conservation order on November 4, 2019, after Applied Underwriters attempted an end run around his regulatory authority. The conservation order prevented a merger of CIC into a newly created New Mexico affiliate without the Commissioner’s approval.  

The long-awaited decision dismantles CIC’s arguments against a rehabilitation plan first filed with the court on October 19, 2020. Those objections focused on the proposed litigation settlement provisions in Section 2.6 for the policyholder lawsuits stemming from the EquityComp program and its illegal reinsurance participation agreement. Applied Underwriters also objected to the terms in Section 2.2 for the public solicitation of a reinsurer to take over CIC’s California operations. 

The settlement provisions in Schedule 2.6 would give policyholders three options for settling these legacy disputes that predate the conservation proceedings. The bidding process for CIC’s California operation gives preference for a carrier not affiliated with Applied Underwriters. If an affiliated carrier is selected, the deal would require claims administration to be handed over to an independent third-party administrator.  

Judge Greenberg ruled that, in both cases, the state had a rational basis for proposing each of the disputed sections and rejected CIC’s objections. Workers’ Comp Executive is creating an in-depth analysis of the court’s action for premium subscribers.  

A copy of the decision and rehabilitation plan is available here in the Resources section. 

Our stories about Applied Underwriters’, CIC, and Equity Comp, going back to April 2015, can be found by clicking here. As a public service, they are not behind the paywall