The San Mateo Superior Court that oversaw the conservation of California Insurance Company and the adoption of a rehabilitation plan that will usher the carrier out of the state approved another $846,000 in legal fees and expenses incurred by the Conservation and Liquidation Office. The latest bill brings the state’s overall costs in the five-year-old proceeding to $13 million and does not include any of the costs incurred so far in 2024 as Applied Underwriters continues its fight against the rehabilitation plan in the courts of appeal.
The San Mateo court last month approved a sixth tranche of payments for expenses and legal fees associated with the state’s 2019 takeover of the carrier after Applied sought an end-run around Insurance Commissioner Ricardo Lara’s regulatory authority. The latest charges cover expenses incurred in the second half of 2023 as the court held two lengthy hearings to review and ultimately approve the rehabilitation plan. The court-appointed conservator also had to write and defend the court’s order approving the rehabilitation plan. The state’s costs are reimbursed out of CIC’s assets.
CIC and Applied Underwriters opposed the Conservator’s first request for expenses and costs but lost. It has not opposed any of the subsequent motions for costs.
Applied is currently pursuing an appeal in the First District Court of Appeal. The appeals court earlier took little time to deny CIC’s petition for a writ of mandate challenging the rehabilitation plan noting that “a remedy by immediate direct appeal is presumed adequate.” Briefing is underway in the appeal.
Litigious Nature
Attorney Cynthia Larsen filed the paperwork supporting the bill for $846,283 that the San Mateo court approved. The total cost the state has incurred in the case through December 31, 2023, was $12,997,571. Larsen notes in the motion for payment filed in July that much of the costs are driven by Applied’s litigation tactics.
“In the four-and-a-half years that have ensued, Respondent has vigorously contested the conservation itself and subsequent stages of this proceeding,” she wrote. “It filed an Application to Vacate the Conservation (which the Court denied), petitioned the court of Appeal for writ review of that decision (which the Court of Appeal denied), filed an Anti-SLAPP motion against the Conservator (which the Court denied), pursued extensive discovery against the Conservator (to which the Conservator has responded with extensive productions of documents and deposition witness), filed a voluminous opposition and several supplemental briefs opposing the Plan Application, and filed a 50-page alternative order to the Conservator’s Proposed Order Approving the Proposed Rehabilitation Plan for CIC.”
The Conservator’s latest costs and expenses stem from the preparation for and attendance at two hearings on the proposed rehabilitation plan. Following the hearing the court adopted its tentative ruling approving the state’s rehabilitation plan and ordered the Conservator’s attorney to prepare the order approving the proposed rehabilitation plan which ended up being 100 pages.
The Conservator also had to defend the injunctions staying litigation over CIC’s reinsurance participation agreement that are pending in courts around the state. Two motions were filed in one of the cases to lift the stay, but at hearing the court denied the motions. Overall, of the $846,283 approved by the court, $825,141 was for legal fees and expenses, $11,938 was for CLO staffing costs and $9,204 was for expenses incurred by CLO and the Department.