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SPENCER Y. KOOK (SBN 205304)
skook@mail.hinshawlaw.com
HINSHAW & CULBERTSON LLP
633 West 5th Street, 47th Floor
Los Angeles, CA 90071-2043
Telephone: 213-680-2800
Facsimile: 213-614-7399
TRAVIS WALL (SBN 191662)
twall@mail.hinshawlaw.com
JARED W. MATHESON (SBN 275459)
jmatheson@hinshawlaw.com
HINSHAW & CULBERTSON LLP
One California Street, 18th Floor
San Francisco, CA 94111
Telephone: 415-362-6000
Facsimile: 415-834-9070
ELECTRONICALLY
FILED
Superior Court of California,
County of San Francisco
01/20/2017
Clerk of the Court
BY-:ANNA TORRES
Deputy Clerk
Attorneys for Defendants APPLIED UNDERWRITERS, INC., APPLIED UNDERWRITERS
CAPTIVE RISK ASSURANCE COMPANY, INC., CALIFORNIA INSURANCE COMPANY,
CONTINENTAL INDEMNITY COMPANY and APPLIED RISK SERVICES, INC.
SUPERIOR COURT OF THE STATE OF CALIFORNIA.
FOR THE COUNTY OF SAN FRANCISCO
UNLIMITED JURISDICTION
WARWICK AMUSEMENTS CORPORATION, a
Delaware corporation, WARWICK CALIFORNIA
CORPORATION, a California corporation,
WARWICK DENVER CORPORATION, a
Delaware corporation, WSF BEVERAGE
CORPORATION, a California corporation,
WARWICK MELROSE DALLAS
CORPORATION, a Delaware corporation,
SILVER AUTUMN HOTEL (N.Y.)
CORPORATION, LTD., a Delaware corporation,
Plaintiffs,
VS.
APPLIED UNDERWRITERS, INC., a Nebraska
corporation, APPLIED UNDERWRITERS
CAPTIVE RISK ASSURANCE COMPANY,
INC., an Lowa corporation, CALIFORNIA
INSURANCE COMPANY, a California
corporation, CONTINENTAL INDEMNITY
COMPANY, an Iowa corporation, APPLIED RISK
SERVICES, INC., a New York corporation, and
DOES | through 50, inclusive ,
Defendants.
Case No. CGC-16-551614
DEFENDANTS APPLIED
UNDERWRITERS, INC., APPLIED
UNDERWRITERS CAPTIVE RISK
ASSURANCE COMPANY, INC.,
CALIFORNIA INSURANCE
COMPANY, CONTINENTAL
INDEMNITY COMPANY, AND
APPLIED RISK SERVICES, INC.’S
MOTION TO STRIKE
EXHIBIT 11 TO REQUEST FOR
JUDICIAL NOTICE
First Amended Complaint Filed:
May 19, 2016
Date: February 16, 2017
Time: 9:30 a.m.
Department: 302
Reservation No. 01190216-06
DEFENDANTS’ NOTICE OF MOTION AND MOTION TO STRIKE
Case No. CGC-16-551614EXHIBIT “11”Au
BEFORE THE INSURANCE COMMISSIONER
OF THE STATE OF CALIFORNIA
In the Matter of the Certificates of File No: MI-2015-00064
Authority of :
CALIFORNIA INSURANCE COMPANY STIPULATED CONSENT CEASE AND
and APPLIED UNDERWRITERS DESIST ORDER
CAPTIVE RISK. ASSURANCE
COMPANY, INC. ~
Respondents,
‘The Culifornia Department of Insurance (CDI), Respondent California Insurance
Company (CIC) and Respondent Applied Underwriters Captive Risk Assurance Company, Inc,
(AUCRA) enter into this Stipulated Consent Cease and Desist Order (Consent Order) and CIC
and AUCRA! consent to the issuance of this Consent Order by the Insurance Commissioner
pursuant to the terms set forth below, :
: I.
MATTERS IN THIS PROCEEDING
A. CIC and AUCRA each acknowledge service and receipt of the Notice of Hearing and
Order to Cease and Desist from Issuance or Renewal of Workers’ Compensation Insurance
Policies and Collateral/Ancillary Agreements ini Violation of Insurance Code §§11658 and 11735
and California Code of Regulations, Title 10, Sections 2251, and 2268 dated June 28,2016 (the
Notice) and acknowledge service and receipt of the Amended Notice of Hearing and Orderto
Cease and Desist ftom Issuance or Renewal of Workers’ Compensation Insurance Policies and
‘ Nothing {a this Consent Order shall be construed as au admission by CDI that CIC and AUCRA are nota singlo
entity for purposos of the Commissioner's Order in In the Matter of the Appeal of Shasta Linen Supply, Ine., CDI Vle
No. AHB-WCA-14-31,Collateral/Ancillary Agreements in Violation of Insuraice Code §§11658 and 11735 and
California Code of Regulations, Title 10, Sections 2251 and 2268 dated July 13, 2016 (the
Amended Notice).
B. CIC and AUCRA deny the allegations set forth in the Notice and the Amended Notice
but in Liew of proceeding with a hearing on the Amended Notice on July 27, 2016, agree to the
torms set forth in this Consent Order.
C, The CDI, CIC and AUCRA agree that the terms of this Consent Order do not
constitute an admission or agreement by CIC or AUCRA as to matters alleged in the Notice and
the Amended Notice, :
I
A. The Notice and Amended Notice alloge that CIC issued guaranteed cost workers’
compensation insurance policies (Guaranteed Cost Policies) that required the employer/insured to
enter into a Reinsurance Participation Agreement (RPA) with AUCRA;
_ B, The Insurance Commissioner issued a Decision & Order in Jn the Matter of the Appeal
of Shasta Linen Supply, Ine, CDI Kile No, AHB-WCA-14-31 (Shasta Linen), which stated that
the RPA issued to Shasta Linen Supply, Inc. in connection with a Guaranteed Cost Policy was
illegal and void because it is an unfiled and unapproved collateral agreement that was not filed
‘with the California Workers’ Compensation Insurance Rating Bureau (WCIRB) and the CD1in
compliance with Insurance Code §§11658 and 11735 and California Code of Regulations, Tite
10, §2268 and former §2218,
C. The Decision and Order in Shasta Linen was made precedential pursuant to
Government Code §11425,60(b). 7 ;
D. CIC disagrees with the findings in the Shasta Linen Decision & Order and it has filed
a Verified Petition for a.Peremptory Writ of Mandate and Complaint for Declaratory and :
Inpunctive Relief, Los Angeles County Superior Court Case No, BS 163243 (the Writ
Proceeding), which challenges the Shasta Linen Decision & Order,
Mlce a Oh Rk wh
0
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DEFINITIONS
A. The term RPA means (i) the RPA form issued to Shasta Linen Supply, Ino. that was
the subject of the Decision & Onder in Shasta Linen for which the current term of the RPA has
hot expired or (ii) any form of RPA that is substantially similay to the RPA ismed to Shasta Linen
Supply, Inc. and that is ancillary or collateral to a guaranteed. cost workers’ corapensation.
insurmee policy that covers claims by California workers arising within locations in California
and/or employees employed in facilities in California, or workers whose employment is otherwise
covered under California workers” compensation laws, regardless of where CIC and an employer
entered the contract for which the ourrent term of the RPA has not expired: This definition
excludes non-Californin employees that are covered by a non-California workers’ compensation
policy.
B. The term “Policy” ox Policies” means (i) a Guaranteed Cost Policy or Policies for
which an RPA is in force as of July 1, 2016 (that is, the current term of the RPA has not expired)
and (ii) Guaranteed Cost Policies that cover claims by California workers, arising within locations
in California and/or employees employed in facilities in California or workers whose employment
is otherwise covered under California workers’ compensation Jaws, regardless of where CIC and
an employer ontered the contract, for which the RPA. expired between the date of the Notice and
the date of this Consent Order (hereinafter, "California Policy"). This definition excludes non-
California employees that are covered by a non-California workers' compensation policy.
Iv
A. CIC and AUCRA will cease and desist from issuing new RPAs or renewing oxisting
RPAs with respect to a California Policy until such time as the RPA. has been submitted to the
WCIRB and the CDI in compliance with ihe requirements of Insurance Code §11658 and §11735
and all other applicable statutes and regulations, and the RPA bas nat been disapproved.
B, Notwithstanding Paragraph IV (A) above, CIC may renew a Policy issued in
connectlon with an RPA in force as of July 1, 2016.
| 3C, Arbitrations under oither an RPA that is currently an in-force RPA or a past RPA
entered into or issued in California will take place in California,
D. CIC and AUCRA will not apply run-off loss development factors to any Policy at any
time, including upon termination, cancellation or nonrenewal of the RPA or upon termination,
cancellation of nonrenewal of the Policy. The term “run-off loss development factor” means the
run-off loss development factor referred to in RPA Schedule 1, Paragraph 4, :
E, CDI actuaries, on the one band, and CIC and AUCRA actuaries on the other hand, will
immediately mect and confer for the purpose of determining and agreeing upon modified loss
development factors (LDI's) to be used in connection with the Policies, Upon agreement among
the actuaries as to modified LDFs, which may include the current LDFs, those LDFs will apply to
the Policies and RPAs. ,
BR cdl actuaries and CIC and AUCRA actnarles ate able to agree on modified LDFs,
as referred to in Paragraph (LV) (E), then no hibtring will be held on the Amended Notice, and this
matter will be concluded. If the CDI actuaries and CIC and AUCRA actuaries are unable to agree
on modified LDFs, or if the Insurance Commissioner does not.approve an agreement by the
parties, the hearlng on the Amended Notice will proceed on September 2 and September 9, 2016,
or such other ot continued heating date agreed upon by CDI, CIC, AUCRA, and the
Administrative Hearing Bureau (AEB), or as set by AHB,
G. Lfan agreement among actuaries as specified in Paragraph LV (F) isnot reached, CIC
and AUCRA agree that nonetheless the amendments to RPAs that are specified in Paragraph TV
(©) and IV () of this Consent Order will nevertheless remain in force,
: . Notwithstanding Article TV, A, AUCRA may issue or renow RPAs and CIC may issue
or renew Guaranteed Cost Policies in connection with RPAs if a final judgment has been entered
in the Writ Proceeding which determines that (i) the RPA is nota collateral or ancillary
} agreement subject to the requirements of Insurance Code §11658 and applicable regulations; (ii)
‘the RPA is not subject to the filing requirements of Insurance Code §11735; and (iii) the RPA is
not otherwise subject to filing requirements of the Insurance Code.1. If CIC or AUCRA obtain a preliminary injunction in the Writ Proceeding on the
grounds specified in Paragraph IV (HM), above, CIC and AUCRA agree to meet and confer with
the CDI to determine whother such relief should cause the parties to agree to stay this Consent
Order pending the outcome of the Writ Petition on the merits. CIC and AUCRA acknowledgo
that the CDI does not concede that injunctive telief is an appropriate remedy in the Writ
Proceeding, ‘
J, Ife final judgment of the nature specified in Paragraph TY (H) above is entered, CIC
and AUCRA nonetheless agree that the amendments to RPAs that are specified in Paragraph
TV(C) and-IV(D) of this Consent Order will remain in force, and (li) if CDI actuaries ‘and CIC and
AUCRA actuaries agree upon loss development factors as provided for in Paragraph IV(B)
below, the agreed upon loss development factors will continue to apply to any RPA currently in
force at the time of this Consent Order,
K. ClC and AUCRA will recalendar the date for hearing on the Notice of Motion and
Motion for Stay of Administrative Order filed in the Writ Proceeding (Motion for Stay) for on or
after September 30, 2016, Ifa hearing on the Amended Notice has not concluded by September
30, 2016, and has not otherwise been settled, CIC and AUCRA will continue the hearing date on
the Motion for Stay by thirty days, and such additional time thereafter as will ensure that a
reuotice of the hearing would both be served after the hearing on the merits of the Amended
Notice has concluded, and ‘comply with sections 1005 and 1013 of the Code of Civil Procedure,
Furthermore, prior to such renotice, CDI, on the one hand, and CIC and AUCRA on the other
hand, will confer as to tho relief sought by CIC and AUCRA in the Motion for Stay to ensure that
any stay order that may be issued does not modify or negate any of the terms of this Consent
Order,
L, This Consent Order only pertains to the proceeding noticed and matters set forth in the
Amended Notice and it does not pertain to the Writ Petition or Shasta Linen, and nothing in this
Consent Order constitutes a waiver of CIC’s or AUCRA's rights to pursue the Writ Proceeding or
other relief pertaining to Shasta Linen (except as limited by, Paragraph H above.)M. Nothing in this Consent Order prevents CIC from issuing standalone Guaranteed Cost
Policies that have been submitted to the WCIRB and the CDI and which have not been
disapproved. The term “standalone” means a Guaranteed Cost Policy for which no RPA is
entered into,
N. Nothing in the Consent Order limits or affects tho rights of the Insurance
Comnnissioner in connection with the Writ Petition or Shasta Linen and, except as otherwise
specified in Articlo IV. D, B, F, and J above, nothing in this Stipulated Agreement affects -or-
limits the powers or rights of the Insurance Commissioner to contend or declare that RPAs (other
than RPAs that me filed with the WCIRB and the CDI and that are not disapproved) are
unenforceable, void, voidable, or illegal and nothing limits the powers or righis of the Insurance
Commissioner to initiate or make any invostigation, to institute any legal or administrative
proceeding, to take any action permitted by law, and to seek and obtain all relief and remedies
Gneluding any fines or penaltics), or to adjudicate the rights of othors, as otherwise permitted by
law, ,
O. This Consent Order only applies to policies and RPAs covering loss exposures in
California, claims arising within Jocations in California and California workers, The Consent
Order ig not intended to impact policies or RPAs relating to risks covered outside of California,
P. This Consent Order may be executed in counterparts, each of which shall constitute a
duplicate original, Execution by facsimile or by electronically transmitted signature shall be fully
and legally binding, : :
Q, CIC and AUCRA acknowledge that this Consent Order is a public record pursuant to
Govornment Code §6250 er seg. Pursuant to Insurance Code §12968, this Consent Order will be
posted on the CDI’s internet website, :
R. This Consent Order will be intexproted and construed in accordance with California
law, without regard to choice-pf-law considerations. :
§. Respondents acknowledge that Insurance Code §12921(b) (1) requires the Insurance
Commissioner to approve the final settlement of this matter. The terms of this Consent Order are1} contingent upon the Insurance Commissioner's apptoval, which shall be evidenced by the Order
21 in substantially the form and content as set forth on page 8 hereof,
The CDI and Respondents CIC and AUCRA execute this Consent Order as follows:
Date: A iM) 2S 2016 CALIFORNIA DEPARTMENT OF INSURANCE
Date: brs fy, 2016 CALIFORNIA INSURANCE COMPANY
By:
12 1g sechaciny
13 Title
Date: _Abyad 20°, 2016 APPLIED UNDERWRITERS CAPTIVE RISK
uv Bye ASSURANCE COMPANY, INC.[PROPOSED] ORDER ADOPTING
STIPULATED CONSENT CEASE AND DESIST ORDER
GOOD CAUSE HAVING BEEN SHOWN, California Insurance Commissioner Dave
Jones hereby adopts the Stipulated Consent Cease and Desist Order set forth on pages | through 7
of this document, and hereby orders that the parties comply with the terms and conditions to
which they have agreed.
Date: September ( . 2016
DAVE JONE
CALIFORNIA INSURANCE
COMMISSIONERIn the Matter of the Certificates of Authority of
CALIFORNIA INSURANCE COMPANY and
APPLIED UNDERWRITERS CAPTIVE
RISK ASSURANCE COMPANY, INC.
Respondents.
) DECLARATION OF SERVICE
) BY MAIL
File No. MI-2015-00064
)
)
)
)
)
)
IT am over the age of 18 years, and not a party to this cause.
Tam an employee at the Department of Insurance, State of California, employed at 45 Fremont Street,
21st Floor, San Francisco, CA 94105.
On September 6, 2016, at San Francisco, California, | sealed into an envelope and deposited in the
United States mail, postage there upon fully prepaid, true copies of the following documents in the
above entitled matter; the original, or a true copy, of each document served is attached hereto; said
copies were addressed as follows:
STIPULATED CONSENT CEASE AND DESIST ORDER and DECLARATION OF SERVICE were
e-mailed and mailed to:
Spencer Y. Kook
James C. Castle
HINSHAW & CULBERTSON LLP
633 West Fifth Street, 47"" Floor
Los Angeles, CA 90071
skook(@mail.hinshawlaw,com
Shand 8. Stephens, Esq.
DLA PIPER LLP (US)
555 Mission Street, Suite 2400
San Francisco, CA 94105-2933
shand.stephens@dlapiper.com
BY E-MAIL & REGULAR MAIL
BY E-MAIL & REGULAR MAIL
I declare under penalty of perjury that the foregoing is true and correct.
Executed on September 6, 2016, at San Francisco, California.
4972552.1
Bite
Flgrinda Cristobal, Declarant