On April 22, 2016 a
Motion,Ex Parte
was filed
involving a dispute between
Applied Underwriters Captive Risk Assurance,
California Insurance Company,,
Silver Autumn Hotel,
Warwick Amusements Corporation,,
Warwick California Corporation,
Warwick Denver Corporation,,
Warwick Melrose Dallas Corporation,
Wsf Beverage Corporation,,
and
Applied Risk Services, Inc.,,
Applied Underwriters Captive Risk Assurance,
Applied Underwriters, Inc., A Nebraska Corporation,
California Insurance Company,,
Continental Indeminty Company, An Iowa Corporation,
Does 1 Through 50, Inclusive,
Insurance Commissioner In His Capacity,
Willis Of New York, Inc.,
Willis Of New York, Inc., A New York Corporation,
for civil
in the District Court of San Francisco County.
Preview
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 Caltfornia,
‘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 4 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 “4”WorkersCompensation http://www. insurance.ca.gov/01-consumers/105-type/95-guides/09-
6 of 14
How Is Workers Compensation Premium Calculated?
Classification
Workers Compensation premium calculation is based upon how employees are classified according to their
specific work duties and the rate assigned to each corresponding employee classification. Classifications are
developed and assigned by the Workers Compensation Insurance Rating Bureau (WCIRB) in most cases
-Workers Compensation insurers working with the WCIRB generally use the classification codes the WCIRB
provides when rating a workers compensation policy. Insurance companies are allowed to develop and submit
their own classification system to the CDI for approval, but this is uncommon due to the strict standards
required to file a separate workers compensation classification system. The WCIRB provides a policyholder
ombudsman who is available to answer questions from employers on classification, experience modification,
and rating issues. Please see the "Resources" section at the end of this brochure for contact information on
the WCIRB and their policyholder ombudsman.
Open Rating
Workers Compensation insurers assign a specific rate to each occupational classification code. rates must be
filed with the CDI. Currently, California Workers Compensation insurers operate under an "open" rating system.
This open rating system means that individual companies set rates based on their ability to adequately cover
losses and expenses in each classification (occupational business class). Open rating requires that all Workers
Compensation insurers file their rates and all applicable supplementary rate information to the CDI. Rate
approval is based on many factors.One of the most important factors for rate approval is rate adequacy. Rates
must be adequate to maintain the solvency of an insurance company. Adequate rates also act to secure the
proper surplus monies insurance companies are required to have in order to meet potential and continuing
claim obligations. The Insurance Commissioner will not approve rates if they are inadequate to cover an
insurer's losses and expenses, unfairly discriminatory, or create a monopoly in the marketplace. The
Commissioner does not have the authority under law to disapprove rates that may be considered excessive
only.
Premium Modification
The classification code with its corresponding rate is the first part of the rating formula. The rate itself is
expressed in dollars and cents and is multiplied by each $100 of payroll per classification. The payroll for each
class is estimated and then multiplied (per each $100 of payroll) by the applicable rates. The sum of the
equation is referred to as the "base" premium.The base premium continues to be modified (increased or
decreased) using rating plans (usually schedule or judgment rating) and by experience modification. (Please
see the "Glossary" section for definitions of schedule and judgment rating.)
Back to Top
Experience Modification
The experience modification is calculated from loss information that an insurance company is required to
submit to the WCIRB on an annual basis. The WCIRB uses a mathematical formula approved by the CDI to
calculate an experience modification for each employer. The formula takes into account reported paid losses,
claim loss reserves, and payroll amounts for a specific experience period (usually the prior three complete
years of workers compensation coverage). The experience modification indicates the average loss experience
of employers throughout a similar industry and acts as a means of comparison between employers.When the
experience modification is applied to the class rate, along with any other modifications (schedule or judgment),
the final rate is multiplied per $100 of payroll and the estimated premium is established.
Prospective Rating
The type of basic Workers Compensation rating formula illustrated above is called prospective rating. While
Workers Compensation premiums can be calculated using different rating plans (such as dividend plans or
retrospective rating), prospective rating is the most common Workers Compensation premium calculation rating
method used currently. Businesses interested in learning more about Workers Compensation rating methods
should contact a licensed broker-agent for further information and discussion regarding this topic.
Premium Audit
The final premium of a Workers Compensation policy cannot be calculated until the policy term is over and the
employer's payroll records have been audited.The final audit of payroll records determines if the initial payroll
1/20/2017 11:43 AM
Preview
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 Caltfornia, ‘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 4 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 “4”WorkersCompensation http://www. insurance.ca.gov/01-consumers/105-type/95-guides/09- 6 of 14 How Is Workers Compensation Premium Calculated? Classification Workers Compensation premium calculation is based upon how employees are classified according to their specific work duties and the rate assigned to each corresponding employee classification. Classifications are developed and assigned by the Workers Compensation Insurance Rating Bureau (WCIRB) in most cases -Workers Compensation insurers working with the WCIRB generally use the classification codes the WCIRB provides when rating a workers compensation policy. Insurance companies are allowed to develop and submit their own classification system to the CDI for approval, but this is uncommon due to the strict standards required to file a separate workers compensation classification system. The WCIRB provides a policyholder ombudsman who is available to answer questions from employers on classification, experience modification, and rating issues. Please see the "Resources" section at the end of this brochure for contact information on the WCIRB and their policyholder ombudsman. Open Rating Workers Compensation insurers assign a specific rate to each occupational classification code. rates must be filed with the CDI. Currently, California Workers Compensation insurers operate under an "open" rating system. This open rating system means that individual companies set rates based on their ability to adequately cover losses and expenses in each classification (occupational business class). Open rating requires that all Workers Compensation insurers file their rates and all applicable supplementary rate information to the CDI. Rate approval is based on many factors.One of the most important factors for rate approval is rate adequacy. Rates must be adequate to maintain the solvency of an insurance company. Adequate rates also act to secure the proper surplus monies insurance companies are required to have in order to meet potential and continuing claim obligations. The Insurance Commissioner will not approve rates if they are inadequate to cover an insurer's losses and expenses, unfairly discriminatory, or create a monopoly in the marketplace. The Commissioner does not have the authority under law to disapprove rates that may be considered excessive only. Premium Modification The classification code with its corresponding rate is the first part of the rating formula. The rate itself is expressed in dollars and cents and is multiplied by each $100 of payroll per classification. The payroll for each class is estimated and then multiplied (per each $100 of payroll) by the applicable rates. The sum of the equation is referred to as the "base" premium.The base premium continues to be modified (increased or decreased) using rating plans (usually schedule or judgment rating) and by experience modification. (Please see the "Glossary" section for definitions of schedule and judgment rating.) Back to Top Experience Modification The experience modification is calculated from loss information that an insurance company is required to submit to the WCIRB on an annual basis. The WCIRB uses a mathematical formula approved by the CDI to calculate an experience modification for each employer. The formula takes into account reported paid losses, claim loss reserves, and payroll amounts for a specific experience period (usually the prior three complete years of workers compensation coverage). The experience modification indicates the average loss experience of employers throughout a similar industry and acts as a means of comparison between employers.When the experience modification is applied to the class rate, along with any other modifications (schedule or judgment), the final rate is multiplied per $100 of payroll and the estimated premium is established. Prospective Rating The type of basic Workers Compensation rating formula illustrated above is called prospective rating. While Workers Compensation premiums can be calculated using different rating plans (such as dividend plans or retrospective rating), prospective rating is the most common Workers Compensation premium calculation rating method used currently. Businesses interested in learning more about Workers Compensation rating methods should contact a licensed broker-agent for further information and discussion regarding this topic. Premium Audit The final premium of a Workers Compensation policy cannot be calculated until the policy term is over and the employer's payroll records have been audited.The final audit of payroll records determines if the initial payroll 1/20/2017 11:43 AM