A state court recently issued a tentative decision on the protracted legal battle between the California Department of Insurance (CDI) and Applied Underwriters’ California Insurance Company (CIC).
In its ruling, the court sided with the CDI to prevent the company from proceeding with its plans to withdraw from the California market, a move that it has been planning since 2019.
Jeffrey Silver, executive vice president and general counsel for CIC, said the tentative decision “does not greatly affect the insurance group materially” and noted that the company will comply fully with the ruling.
“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,” he said.
Even so, Silver was adamant that CDI had moved with “unbridled overreach and self-authorized expansion of regulatory prerogative” when it chose to impede CIC’s exit by employing a conservation mechanism typically reserved for companies facing severe financial distress.
“To have learned of our plans to exit from California in 2019, and then to have placed us, an 'A' rated carrier, with over $1 billion of capital and surplus in our group, into a conservation…was an egregious and ill-motivated act that has cost taxpayers a small fortune and has adversely affected insurance buyers in the state,” Silver said.
Steve Menzies, chairman and founder of Applied Underwriters, echoed Silver’s statement as he warned of the long-term consequences that the CDI’s actions might have on the California insurance market.
In his comments about the court’s ruling, Menzies remained optimistic about CIC’s performance but lamented the broader implications of the case for the market’s health.
“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,” he said.
“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.”
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