Applied Underwriters Sees “Profound Danger” in Unprecedented Extension of CDI Action to Restrain Company from Exiting California

State court’s proposed statement of decision and tentative order fails to stop stunning CDI overreach and sends warning to insurers in the state

OMAHA, Neb., March 8, 2024 /PRNewswire/ — A California court’s proposed statement and tentative decision in the four-year dispute between the California Department of Insurance (CDI) and the California Insurance Company (CIC) (Commissioner of Insurance vs. California Insurance Company) has failed to undo the unprecedented use of the CDI’s conservation mechanism to restrain CIC from its long-planned exit from the state.

Mr. Jeffrey Silver, Executive Vice President and General Counsel for CIC, called the CDI’s use of a conservation format to mask both its embarrassment over the California Insurance Company’s protracted exit from the state in 2019 and the CDI’s desire to seize an opportunity for the distribution of fees and awards to CDI’s preferred vendors, a “stunning overreach” and a “clear warning” to insurers doing business in the state: “To have learned of our plans to exit from California in 2019, and then to have placed us, an ‘A’ rated carrier, with over $1B of capital and surplus in our group, into a conservation—a status reserved for companies in grave financial danger—was an egregious and ill-motivated act that has cost taxpayers a small fortune and has adversely affected insurance buyers in the state. Unbridled overreach and self-authorized expansion of regulatory prerogative as a practice send a clear signal to the few domiciled companies writing business in California that their business is a target for a weaponized CDI aiming at increased control of private businesses by any means. The Court’s decision does not greatly affect the insurance group materially, but it does restrain our plans to move out of California with the Company that, ironically, bears the state’s name. The entire matter, both on the regulatory and legal sides, has no precedent procedurally or in case law, making it an exotic miscarriage and implicit approval of what may best be termed an ‘unaccountable entrenched bureaucracy.’ We will do all we can to ensure that the terms of the decision are followed to the letter, and that policyholders do not suffer as a result of this injustice.”

According to Mr. Steve Menzies, Chairman and Founder of the Company, the danger that CDI has visited upon the California market will continue to be felt as time goes by, noting that today more than 85 percent of the risk-bearing capital supporting private property and casualty insurance in California is domiciled outside the state: “As the market’s needs increase on many fronts in the wake of natural and marketplace disruptions, instead of working to stop the parade of insurers leaving the state, the CDI is concerning itself with what has been seen by many industry observers as a means of continuing to expand its power base.”

Mr. Menzies added, “Many can attest to the fact that CDI actions reveal a pattern of insider dealing, indifference to public accountability, and a level of activism against targeted companies that belies the presence of operatives with questionable agendas, willing to use a kind of piracy over private assets heedless of the outcome. And so the carriers’ charge to exit continues. Our experience may be seen as a case in point. In fact, the CDI had approved of the redomestication, but then arbitrarily reversed itself and began to conduct this costly battle that benefits no one apart from the operatives’ selected law firms and consultants—certainly, it is not of any benefit to the public or to the insurers who enable businesses and homeowners to have coverage in that most troubled of markets. Despite this unnecessary conflict, our firm fortunately is doing very well; however, this matter does signify a souring of the marketplace and creates an extra incentive to leave the state. We regret the judge’s ruling, although we are pleased with some of the terms.”

For further information, contact [email protected].

About Applied Underwriters (www.auw.com)

Applied Underwriters® is a global risk services firm that helps businesses and people manage uncertainty through its business services, insurance and reinsurance solutions. As a company, Applied Underwriters has been distinguished by its innovative approaches to client care and by its strong financial strength. Applied Underwriters operates widely throughout the US, UK, EU and Middle East. Its operational headquarters is located in Omaha, Nebraska.

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SOURCE Applied Underwriters