Document for WARWICK AMUSEMENTS CORPORATION, ET AL VS. APPLIED UNDERWRITERS, INC., A NEBRASKA CORPORATION ET AL

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                                SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO

MINUTES

May 30, 2018

WARWICK AMUSEMENTS
CORPORATION, et al.

PLAINTIFFS
VS.

APPLIED UNDERWRITERS, INC., A
NEBRASKA CORPORATION, ef al.

DEFENDANTS

Present:

Judge: RICHARD B. ULMER

Reporter: Debbie Acevedo-Ramirez,

CSR# 7692, Atkinson-Baker,
818-551-7300

Appearing for Plaintiff (s):
Larry J. Lichtenegger, Esq.
Lichtenegger Law Office
3850 Rio Road, Suite 58
Carmel, CA 93923

O: 831-626-2801
E: lawyer@mbay.net
for Plaintiffs

Warwick California Corporation and
WSF Beverage Corp.

Case Number: CGC-16-551614

Department: 306
Case Number: CGC-16-551614

Nature of Cause: Breach of
Contract [Workers’
Compensation Insurance]

Today's Proceedings:
Defendants’ Case

Trial Day: 2

Clerk: R. MICHAEL DILES
Bailiff:

Appearing for Defendant(s):
Spencer Y. Kook, Esq.

Kent R. Keller, Esq.

Hinshaw & Culbertson LLP
633 West 5th Street, 47th Floor
Los Angeles, CA 90071-2043

O: 213-614-7359 [Kook]
O: 213-614-7302 [Keller]

E: skkook@mail.hinshawlaw.com
E: kkeller@mail.hinshawlaw.com

For Defendants

Applied Underwriters Captive Risk
Assurance Co., Inc.; Applied
Underwriters, Inc.; Continental
Indemnity Co.

Date: May 30, 2018

Case Title: WARWICK AMUSEMENTS CORPORATION, ET AL VS. APPLIED
UNDERWRITERS, INC., A NEBRASKA CORPORATION ET AL

-l-

Form: CO1006Appearing for Plaintiff (s):

Appearing for Defendant(s):
Travis R. Wall, Esq.

Hinshaw & Culbertson LLP

One California Street, 18'* Floor
San Francisco, CA 94111

O: 415-743-3738 [Wall]
E: twall@hinshawlaw.com

For Defendants

Applied Underwriters Captive Risk
Assurance Co., Inc., a California
Insurance Company; Applied
Underwriters, Inc., a Nebraska
Corporation; Continental Indemnity
Co.

are all present as is Mr. Michael Sheh, P

30 PM
Gardiner re
he witness,
2013 to 2014 California Insurance Com
Employer's Liability Insurance Policy No.
Amusements Corporation for the policy
X) (Estimated Premium) [AU0002184-22
Compensation and Employer's Liability
issued to Warwick Amuse
hrough 06/14/15 (CA, TX
Defendants’ Exhibit #141
Compensation and Employer's Liability
issued to Warwick Amuse!
hrough 05/04/16 (CA, TX
direct examination of Ms.

Court in session, on the rec:
urns to the witness stand. M

(Es

(Es
Ga

imated Pr
rdiner.

132 PM Mr. Kook refers the witness
Defendants’ Exhibit #143 [201

Case Number: CGC-16-5516

4

3 to 2014 California Insurance Com

his matter comes on for Court trial, having been continued from May 29, 2018.
he Court, reporter, courtroom staff and counsel, indicated in bold-face, above,

laintiffs’ representative.

‘ord. At the Court's invitation, Ms. Ellen
r. Kook resumes direct examination of

referring the witness to previously admitted Defendants’ Exhibit #137

pany Workers' Compensation and
73-87 1862-01-02 issued to Warwick
period 06/14/13 through 06/14/14 (CA,
37]], Defendants’ Exhibit #139 [Workers'
nsurance Policy No. 73-871862-01-03

ments Corporation for the policy period 06/14/14

imated Premium) [AU002238-2292]], and

2015 to 2016 California Insurance Company Workers'

nsurance Policy No. 73-871862-01-05

ments Corporation for the policy period 06/14/15

emium) [AU0002293-2348]] and resumes

© pre-approved and now admitted
pany Workers’

Date: May 30, 2018

Case Title: WARWICK AMUSEMENTS CORPORATION, ET AL VS. APPLIED

UNDERWRITERS, INC., A NEBRASKA COR
-2-

PORATION ET AL
Form: CO1006Compensation and Employer's Liability Insuranc
issued to Warwick Amusements Corporation for
hrough 06/14/14 (CA, TX
Exhibit #145 [2014 to 2015
Compensation and Employer's Liability Insuranc
issued to Warwick Amusements Corporation for
hrough 06/14/15 (CA, TX
Exhibit #147 [2015 to 2016
Compensation and Employer's Liability Insuranc
issued to Warwick Amusements Corporation for
hrough 05/04/16 (CA, TX
direct examination of Ms. Gardiner.

34 PM Mr. Kook refers the witness
Defendants’ Exhibit #138
Compensation and Employer's Liability Insuranc
issued to Warwick Amusements Corporation for
hrough 06/14/14 (CO, NY) (Estimated Premium
Exhibit #140 [2014 to 20
Compensation and Employer's Liability Insuranc
issued to Warwick Amusements Corporation for
hrough 06/14/15 (CO, NY) (Estimated Premium

© pre-a

Compensation and Employer's Liability Insuranc
issued to Warwick Amusements Corporation for
hrough 05/04/16 (CO, NY) (Estimated Premium
direct examination of Ms. Gardiner.

135 PM
Defendants’ Exhibit #144 [2013 to 20
Compensation and Employer's Liability Insuranc
issued to Warwick Amusements Corporation for
hrough 06/14/14 (CO, NY) (Earned Premium) [A
Exhibit #146 [2014 to 2015 Continen
Compensation and Employer's Liability Insuranc
issued to Warwick Amusements Corporation for
hrough 06/14/15 (CO, NY) (Earned Premium) [A
Defendants’ Exhibit #148 [2015 to 20
Compensation and Employer's Liability Insuranc
issued to Warwick Amusements Corporation for
hrough 05/04/16 (CO, NY) (Earned Premium) [A
direct examination of Ms. Gardiner.

Case Number: CGC-16-551614
Case Title: WARWICK AMUSEMENTS CORPORATI

2013 to 2014 Continen

5 Continental Indemnity Company Workers’

Defendants’ Exhibit #142 [2015 to 2016 Continen

Mr. Kook refers the witness to pre-approved and now admit
4 Continen

‘al Indemnity Company Workers'

6 Continen

-02
13

e Policy No. 73-871862-0
he policy period 06/14/

(Earned Premium) [AU0002019-2072]], Defendants’
California Insurance C

ompany Workers’
e Policy No. 73-871862-0
he policy period 06/14/

-03
14

(Earned Premium) [AU0002073-2127]], and Defendants’
California Insurance Company Workers’

-05
15

e Policy No. 73-871862-0
he policy period 06/14/

(Earned Premium) [AU00002128-2183]and resumes

ed
Workers’

pproved and now admit
‘al Indemnity Company
e Policy No. 73-871862-01-01
he policy period 06/14/13
AU0002447-2476]], Defendants’

-04
14

e Policy No. 73-871862-0
he policy period 06/14/
AU0002477-2509]], and
‘al Indemnity Company
e Policy No. 73-871862-01-06

he policy period 06/14/15
[AU002510-2544]] and resumes

Workers’

ed
‘al Indemnity Company Workers’
e Policy No. 73-871862-01-01
he policy period 06/14/13

U0002349-2378]], Defendants’

-04
14

e Policy No. 73-871862-0
he policy period 06/14/
U0002379-2411]], and

al Indemnity Company Workers'
e Policy No. 73-871862-01-06

he policy period 06/14/15
U00002412-2446]] and resumes

Date: May 30, 2018
ON, ET AL VS. APPLIED.

UNDERWRITERS, INC., A NEBRASKA CORPORATION ET AL

-3-

Form: CO10061:36 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #174 [06/25/08 Letter from the California Department of
Insurance to Jeff Silver regarding approval of the various forms including July 1,
2005 Quota Share Reinsurance Agreement between California Insurance
Company and Applied Underwriters Captive Risk Assurance Company
attaching same] and resumes direct examination of Ms. Gardiner.

1:39 PM The Court questions the witness regarding the meaning of “profit-
sharing” as used by the witness. Mr. Kook resumes direct examination of Ms.
Gardiner.

1:41 PM Mr. Kook refers the witness to previously admitted Defendants’
Exhibit #136 [Reinsurance Participation Agreement effective date 06/14/13
dated 06/19/13[Willis-027887-027898]] and resumes direct examination of Ms.
Gardiner.

1:46 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #111 [03/14/13 9:40 PM E-mail from Tina Bowe to Clyde
Stackhouse re: Warwick Hotel — WC, GL, Auto incl GKLL and Umbrella New
Business Submission Eff 6/1/13-14 and attaches: WC Renewal Exposures.xls, CA
Exp Mod.pdf, Copy of Named Insured Schd incl FEIN.XLSX; Copy of revenue
2012.xisx; Copy of Supplemental Application 2013 TO BE UPDATED.XLS;
Description of Operations. Doc; Garageexposure.doc; Interstate Exp
Mod.pdf;Non Owned and Hired Automobile Questionnaire.doc; WSF Beverage
we submission 2013.doc; GL Auto Umb Sub 2013.doc; Warick We submission
2013.doc; Copy of Warwick Losses (Mitsui) @ 02-28-13 WC AL GL.XLSM; Copy of
Warwick Losses (LM)@ 03-01-13 WC AL GL.XLSM] and resumes direct examination
of Ms. Gardiner.

148 PM The Court questions the witness regarding the relationship between
insurance broker and the underwriter. Mr. Kook resumes direct examination
of Ms. Gardiner.

153 PM Mr. Kook refers the witness to previously admitted Defendants’
Exhibit #79 [06/11/13 10:55 PM E-mail from Tina Bowe to Michael Sheh re: RE:
Worker Comp Liability and Attaches: AU QUOTE V2.pdf; Warwick Amusements
Corporation Agreement pdf] and resumes direct examination of Ms. Gardiner.

:55 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #118 [05/22/13 9:07 AM E-mail from Ronald Palmerton to
ina Bowe re: Applied Underwriters’ Quote for Warwick Amusements Corp.
QAC- QJV and attaches: Warwick Amusements Corporation_Scenario.pdf;

Case Number: CGC-16-551614 Date: May 30, 2018
Case Title: WARWICK AMUSEMENTS CORPORATION, ET AL VS. APPLIED
UNDERWRITERS, INC., A NEBRASKA CORPORATION ET AL

-4- Form: CO1006Warwick Amusements Corporation_Proposal.pdf [Christina Bowe Depo. Exh. 8;
1D0000469-000471]] and resumes direct examination of Ms. Gardiner.

1:57 PM Mr. Kook again refers the witness to previously admitted Defendants’
Exhibit #79 [06/11/13 10:55 PM E-mail from Tina Bowe to Michael Sheh re: RE:
Worker Comp Liability and Attaches: AU QUOTE V2.pdf; Warwick Amusements
Corporation Agreement pdf] and resumes direct examination of Ms. Gardiner.

2:01 PM The Court questions the witness regarding the money-flow of
premium payments. In response, the witness refers the Court to the
demonstrative slides referenced in the opening statement presentation by
Defendants’ counsel. Court and witness review the slides.

2:10 PM Mr. Kook resumes direct examination of Ms. Gardiner, again
referring the witness to previously admitted Defendants’ Exhibit #79 [06/11/13
10:55 PM E-mail from Tina Bowe to Michael Sheh re: RE: Worker Comp Liability
and Attaches: AU QUOTE V2.pdf; Warwick Amusements Corporation
Agreement pdf].

2:12PM The Court questions the witness regarding the meaning of “annual
loss pick.”
2:14PM Mr. Kook resumes review of previously admitted Defendants’ Exhibit

#79 [06/11/13 10:55 PM E-mail from Tina Bowe to Michael Sheh re: RE: Worker
Comp Liability and Attaches: AU QUOTE V2.pdf; Warwick Amusements
Corporation Agreement pdf] with Ms. Gardiner.

2:17 PM The Court questions the witness regarding the determination of
various data in Defendants’ Exhibit #79. Mr. Kook resumes direct examination of
Ms. Gardiner.

2:21 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #119 [05/24/13 1:21 PM E-mail from Ronald Palmerton to Tina
Bowe re: RE: Applied Underwriters’ Quote for Warwick Amusements Corp. QAC
- QJV and attaches: SamplePlanAnalysis_Lrg. Pdf [Christina Bowe Depo. Exh. 10;
1D0000466-0000467]] and resumes direct examination of Ms. Gardiner.

2:25 PM The Court questions the witness regarding monthly billing. Mr. Kook
resumes direct examination of Ms. Gardiner.

2:28 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #155 [EquityComp® Statement for Warwick Amusements

Case Number: CGC-16-551614 Date: May 30, 2018
Case Title: WARWICK AMUSEMENTS CORPORATION, ET AL VS. APPLIED
UNDERWRITERS, INC., A NEBRASKA CORPORATION ET AL

-5- Form: CO1006Corporation for the period 06/01/13 to 06/30/13 dated 07/09/13 [AU0002551-
0002552]] and resumes direct examination of Ms. Gardiner.

2:31 PM The Court questions the witness regarding certain data in
Defendants’ Exhibit #155. Mr. Kook resumes direct examination of Ms. Gardiner.

2:38 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #166 [EquityComp® Plan Analysis for Warwick Amusements
Corporation for the Plan Term 06/14/13 to 06/13/16 for the Period 09/01/13 to
09/30/13 [AU0000204-0000218]] and resumes direct examination of Ms. Gardiner.

2:47 PM Mr. Kook identifies for the record and refers the witness to
Defendants’ Exhibit #191 [Web Site Events Logged] and resumes direct
examination of Ms. Gardiner.

2:49 PM Mr. Kook moves to admit Defendants’ Exhibit #191 into evidence. Mr.
Lichtenegger expresses no objection and the Court admits Defendants’ Exhibit
#191 into evidence.

2:52 PM The Court questions the witness regarding certain data in
Defendants’ Exhibit #191. Mr. Kook resumes direct examination of Ms. Gardiner.

2:53 PM The Court again questions the witness regarding certain data in
Defendants’ Exhibit #191.

2:55 PM Court recesses until 3:10 p.m.

3:08 PM Court in session, on the record. The Court, reporter, courtroom staff
and counsel are all present as is Mr. Michael Sheh, Plaintiffs’ representative. Ms.
Ellen Gardnier returns to the witness stand. Mr. Kook resumes direct examination
of Ms. Gardiner.

3:11 PM Court and counsel discuss the advisability of providing foundational
documents for the witness’ testimony.

3:12 PM Mr. Kook identifies for the record and refers the witness to
Defendants’ Exhibit #192 [Allied Underwriters Monthly Plan Analysis for Warwick
for the period 01/01/16 to 01/31/16] and Defendants’ Exhibit #193 [Allied
Underwriters Monthly Plan Analysis for Warwick for the period 02/01/16 to
02/29/16] and resumes direct examination of Ms. Gardiner.

Case Number: CGC-16-551614 Date: May 30, 2018
Case Title: WARWICK AMUSEMENTS CORPORATION, ET AL VS. APPLIED
UNDERWRITERS, INC., A NEBRASKA CORPORATION ET AL

-6- Form: CO10063:28 PM Mr. Kook identifies for the record and refers the witness to
Defendants’ Exhibit #194 [Allied Underwriters Monthly Plan Analysis for Warwick
for the period 04/01/16 to 04/30/16], Defendants’ Exhibit #195 [Allied
Underwriters Monthly Plan Analysis for Warwick for the period 05/01/16 to
05/31/16], and Defendants’ Exhibit #196 [Allied Underwriters Monthly Plan
Analysis for Warwick for the period 06/01/16 to 06/30/16] and resumes direct
examination of Ms. Gardiner.

3:30 PM Mr. Kook moves to admit Defendants’ Exhibit #192, 193, 194, 195,
and 196 into evidence. Mr. Lichtenegger expresses no objection and the Court
admits Defendants’ Exhibit #192, 193, 194, 195, and 196 into evidence.

3:37 PM Mr. Kook refers the wi
Exhibit #150 [Billing Register for Wa
871862) as of 04/10/18 [AU000367
Ms. Gardiner.

ness to previously admitted Defendants’
rwick Amusements Corporation (Account
-0003672]] and resumes direct examination of

3:39 PM The Court questions the witness regarding various aspects of the
billing process. Mr. Kook resumes direct examination of Ms. Gardiner, and shortly
thereafter, the Court again questions the witness.

3:45 PM Mr. Kook resumes direct examination of Ms. Gardiner.

3:48 PM Mr. Kook refers the witness to Defendants’ Exhibit #152
[Demonstrative Exhibit] [Billing Register for Warwick Amusements Corporation
(Account 871862) as of 04/10/18 [AU000367 1-0003672]] and resumes direct
examination of Ms. Gardiner.

3:52 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #173 [EquityComp® Plan Analysis for Warwick Amusements
Corporation the Plan Term 06/14/13 to 05/03/16 for the Period 03/01/18 to
03/31/18 [AU0003965-0004008]] and previously admitted Defendants’ Exhibit
#136 [Reinsurance Participation Agreement effective date 06/14/13 dated
06/19/13 [Willis-0O27887-027898]] and resumes direct examination of Ms. Gardiner.

4:08 PM Pursuant to an objection by Mr. Lichtenegger, Court and counsel

confer regarding any documentary basis for tl
further discussion and testimony by the witnes:
produce a print version of the da
- upon which Ms. Gardiner is relying for her tes

4:12 PM Mr. Kook resumes direct examina

Case Number: CGC-16-551614

Case Title: WARWICK AMUSEMENTS CORPORA
UNDERWRITERS, INC., A NEBRASKA CORPORATI

-7-

e witness’ current testimony. After
s, the Court orders Defendants to

a —identified as “ Draft Plan Closure Proposal”

timony.

ion of Ms. Gardiner.

Date: May 30, 2018
TION, ET AL VS. APPLIED
ON ET AL

Form: CO1006416 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #186 [02/17/17 Letter from Harry J. LeVine to Hon. Kristin L.
Rosi regarding In the Matter of the Certificates of Authority of California
Insurance Company and Applied Underwriters Insurance Company CDI file No.
MI-2015-00064, agreement on loss development factors (Defendants’ RJN Exh.
N.)] and resumes direct examination of Ms. Gardiner.

4:17 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #153 [Summary of Amount Due for Warwick Amusements
Corporation (Account 871862) as of 04/10/18 [AU0003673]] and resumes direct
examination of Ms. Gardiner.

4:20 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #149 [Calculation of Cancellation Early Cancellation
Charges for Warwick Amusements Corporation (Account 871862) as of 03/31/18

[AU0003876]] and resumes direct examination of Ms. Gardiner.

4:21 PM Mr. Kook refers the witness to pre-approved and now admitted
Defendants’ Exhibit #176 [12/31/06 Report of Examination of the California
Insurance Company], Defendants’ Exhibit #177 [12/31/09 Report of Examination
of the California Insurance Company], Defendants’ Exhibit #178 [06/30/13 Report
of the Market Conduct Examination of the Rating and Underwriting Practices of
the California Insurance Company NAIC # 38865], Defendants’ Exhibit #179
[12/31/13 Report of Examination of the California Insurance Company], and
Defendants’ Exhibit #180 [12/31/13 Examination Report of Applied Underwriters
Captive Risk Assurance Company, Inc., Cedar Rapids, lowa] and resumes direct
examination of Ms. Gardiner.

4:25 PM Mr. Kook refers the witness to Plaintiffs’ Exhibit #8 [Demonstrative
exhibit] [Exhibit showing calculation of Plan Analysis Return to Warwick using
paid claims] and resumes direct examination of Ms. Gardiner.

4:30 PM Noting the time, Court adjourns until 9:00 a.m. tomorrow [May 31,
2018].

4:31 PM Off the record. Court and counsel briefly discuss the schedule for
tomorrow.

Case Number: CGC-16-551614 Date: May 30, 2018

Case Title: WARWICK AMUSEMENTS CORPORATION, ET AL VS. APPLIED
UNDERWRITERS, INC., A NEBRASKA CORPORATION ET AL
-8- Form: CO1006