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Nicholas P. Roxborough, Esq. (SBN 113540)
Joseph C, Gjonola, Esq. (SBN 241955)
Ryan R. Salsig, Esq. (SBN 250830)
Jaclyn D. Grossman, Esq. (SBN 234992)
ROXBOROUGH, POMERANCE, NYE & ADREANI, LLP
5820 Canoga Avenue, Suite 250
Woodland Hills, California 91367
Telephone: (818) 992-9999
Facsimile: (818) 992-9991
Larry J, Lichtenegger, Esq. (SBN 48206)
THE LICHTENEGGER LAW OFFICE
3850 Rio Road, #58
Carmel, California 93923
Telephone: (831) 626-2801
Facsimile: (831) 886-1639
Attorneys for Plaintiffs
ELECTRONICALLY
FILED
Superior Court of California,
County of San Francisco
09/19/2016
Clerk of the Court
BY:DAVID YUEN
Deputy Clerk
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
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,
v.
APPLIED UNDERWRITERS, INC., a
Nebraska corporation; APPLIED
UNDERWRITERS CAPTIVE
RISK ASSURANCE COMPANY, INC., an
Towa corporation; CALIFORNIA
INSURANCE COMPANY, a California
corporation; CONTINENTAL INDEMNITY
COMPANY, an Iowa corporation, APPLIED
RISK SERVICES, INC., a New York
corporation; WILLIS OF NEW YORK, INC.,
a New York corporation; and DOES | through
50, inclusive,
Defendants.
Case No. CGC-16-551614
SUR-REPLY IN SUPPORT OF
OPPOSITION TO APPLIED
UNDERWRITERS’ MOTION TO STAY
BASED ON INCONVENIENT FORUM
Complaint filed: April 22, 2016
SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED’S MOTION TO STAYPlaintiffs hereby file this surreply to make the Court aware of the consent decree entered
between the Applied Defendants in this case and the California Department of Insurance. In the
Stipulated Consent Cease and Desist Order, agreed to by Applied Underwriters Captive Risk
Assurance Company, Inc. (‘AUCRA”) and California Insurance Company (“CIC”), AUCRA
and CIC agreed to “cease and desists from issuing new RPAs or renewing existing 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 the requirements of Insurance Code § 11658 and § 11735 and all
other applicable statutes and regulations, and the RPA has not been disapproved.” [Consent
Order, p. 3]. The order was signed on September 6, 2016. A true and correct copy of the
Stipulated Consent Cease and Desist Order is attached hereto as Exhibit A.
DATED: September 16, 2016 ROXBOROUGH, POMERANCE, NYE &
ADREANI, LLP
am alae
ee AS P. ROXBOROUGH
JQSEPH C. GIONOLA
RYAN R. SALSIG
JACLYN D, GROSSMAN
and LARRY J. LICHTENEGGER
Attorneys for Plaintiffs
By
2
SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED’S MOTION TO STAYEXHIBIT “A”ee pa aS le pe gee
ecUW A A FR BS Se S
Ce 2 A OH aR wed
BEFORE THE INSURANCE COMMISSIONER
OF THE STATE OF CALIFORNIA.
In the Matter of the Certificates of File No,: MI-2015-00064
Authority of ata
CALIFORNIA INSURANCE COMPANY STIPULATED CONSENT CEASE AND
and APPLIED UNDERWRITERS DESIST ORDER
CAPTIVE RISK. ASSURANCE
COMPANY, INC. *
: Respondents,
. The California 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 (Consont Order) and CIC :
and AUCRA! consent to the issuance of this Consent Order by the Insurance Commissioner
pursuant to the terms set forth below, : :
L
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 Agreoments 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 Order to
Cease and Desist from Issuance or Renewal of Workers’ Compensation Trisurance Policies and
i Nothing i in this Consont Order shall be construed as an admission by CDI that CIC and AUCRA aro nota single -
entity for purposes of the Commissioner's Order in In the Matter of the Appeal of Shasta Linen Supply, Inc., CDT File
No, ABB-WCA-14-31. ?we YN A ew PR wD
See ee ee Re ee
co WA A ROW NY HE So
Collateral/Aneillary Agreements in Violation of Insurance Code §§11658 and 11735 and
California Code of Regulations, Title 10, Sections 2251 and 2268 dated July 13, 2016 (the
Atended 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, 7 2016, agree to the
torms set forth in this Consent Order,
C. The CDI, CIC and AUCRA agree that the tertas of this Consent Order do not
constitute an admission or agreement by cle or AUCRA as to mattors alleged in the Notice and
* the Amended Notice,
0
RECITALS
A. The Notice and Amended Notice allege 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 Comtnissionor issued a Decision & Order in Jn the Matter of the Appeal
of Shasta Linen Supply, Inc., CDI File 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
jllogal 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 CDIin
compliance with Insurance Code §§11658 and 11735 and California Code of Regulations, Title
10, §2268 and former §2218.
©, The Decision and Order in Shasta Linen was made precedential pursuant to
_ Government Code §11425.60(b).
_ D. CIC disagrees with the findings in the Shasta Linen Decision & Order and it has filed
a Verified Petition for a Petomptory Writ of Mandate and Complaint for Declaratory and :
Tnjunctive Reliof, Los Angeles County Superior Court Case No. BS 163243 (the Writ
Proceeding), which challenges the Shasta Linen Decision & Order,
Me ,wet A we wD
Doe oe ee Pee ee
Ss Sea QA a REGS Bos
It
DEEINITIONS
A. The tetra RPA means (i) the RPA form issued to Shasta Linen Supply, Inc. that was
the subject of the Decision & Order in Shasta Linen for which the current term of the RPA has
not expired or (i) any form of RPA that is substantially similar to the RPA ismued to Shasta Linen
Supply, Ino. and that is ancillary or collateral to a guatanteed cost workers’ compensation.
insurance policy that covers claims by California workers arising within locations in California
and/or employees employed in facilities in California, ot 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-California employees that are covered by anon-Califoria workers' compensation
policy,
: B, The,term “Policy” or 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 eanployed i in facilities in California or- workers whose employment
is otherwise oovered'under California workers’ compensation laws, regardless of where CIC and
an employer ontored the contract, for which the RPA éxpited 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 workors' compensation policy.
: Iv
AGREEMENT
A, CIC and AUCRA will ceuse and desist from issuing new RP.As of renewing oxisting
RPAs with respect to a California Policy until such time as the RPA hes been submitted to the
WCIRB and the CDI in compliance vith the requirements of Insurance Code §11658 and §11735
and all other applicable statutes and regulations, and the RPA has not been disapproved,
B, Notwithstanding Paragraph IV (A) above, CIC may renew a Policy issued in
connection with an RPA in‘force as of July 1, 2016.Co mI DAA RY DN
a
Se AAA PR DP AS
C, Arbitrations under either an RPA that is currently an in-force RPA ot a past RPA :
entored 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. jorminition, 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.
B, CDI actuaries, on the one hand, and CIC and AUCRA actuaries on the other hand, will
immediately meet and confer for the purpose of determining and agrecing ‘upon modified loss
development factors (LDFs) to be used in connection with the Policies, Upon agreement among
the actuaties as to modified LDPs, which may include the current LDFs, those LDFs will apply to
the Policios and RPAS,
F. If CDI actuaries and CIC and AUCRA actuaries ate able to agree on modified LDFs,
as referred to in Paragraph (IV) (B), then no hating will be held on the Amended Notice, and this
matter will be concluded. If the CDI actuaries aud CIC and AUCRA aotuaries are unable to agree
on modified LDFs, or if the Insurance Coramissioner does not approve an agreement by the
parties, the hearing 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 (AUB), or as set by AHB.
G. [fan agreement among actuaries as specified in Paragraph LV (F) is not reached, CIC
and AUCRA agree that nonetheless the amondmonts to RPAs that are specified in Paragraph Iv
(©) and IV (D) of this Consent Order will nevertheless romain in force. ;
H. Notwithstanding Article 'V. A, AUCRA may issue or renow RPAs and CIC may issue
or renew Guaranteed Cost Policies in conneotion with RPAs ifa final judgment has been entered
in the Writ Proceeding which determines that (i) the RPA is not a collateral or ancillary
agreement subject to the requiroments of Insurance Code §11658 and applicable regulations; (ii)
tho RPA is not subject to the filing requirements of Insuranoe Code §11735; and (tit) the RPA is
-not otherwise subject to filing requitements of the Insurance Code,ome RN Aw eR Bw BY
ea a ka
Se Wa ar 2H CS
20
I IfCIC or AUCRA obtain a preliminary injunction in the Writ Proceeding on the _
grounds specified in Paragraph IV (H), above, CIC and AUCRA agree to meet ‘and confer with
the CDI to determine whether such reliof should cause the parties to agreo to stay this Consent
Order pending the outcome of the Writ Petition on the merits. CIC and AUCRA acknowledge
‘that the CDI does not concede that injunctive relief is an appropriate remedy in the Writ
Proceeding, . ,
: J, Ifa final judgment of the hature specified in Paragraph IV (H) above is entered, CIC
and AUCRA nonetheless agree that the amendments to RPAs that aro specified in Paragraph.
IV(C) and IV) of this Consent Order will remain in force, and (i) if CDI actuaries‘and CIC and
AUCRA actuaries agree upon loss development factors as provided for in Paragraph IV(E)
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. CIC 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 ensuro that a
renotice of the hearing would both be served after tho hoaring 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 tlie other
hand, will confer as to tho relief sought by CIC end AUCRA in the Motion for Stay to ensure that
any stay order that may be issued does not modify or negate any of the texms of this Consent
Order, , ;
L, This Consent Order only pertains to the proceeding notlced and matters set forth dn 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.)ee I A Ww AY wD
M, Nothing in this Consent Order prevents CIC from issuing standalone Guaranteed Cost
Policies that have been subtnitted 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
entoted ints,
N.. Nothing in the Consent Order limits or affects tho tights of the Insurance
Commissioner in connection with the Writ Petition or Shasta Linen and, except as otherwise
specified in Article IV. D, B, F, and J above, nothing in this Stipulated Agrooment affeots-or:
limits the powers or tights of the Insurance Commissioner to contend or declare that RPAs (other
than RPAs that are filed with the WCIRB and tho CDI and that are not disappioved) are
unenforceable, void, voidable, or illegal and nothing limits the powers or rights of the Insurance
Cotamissioner to initiate or make any investigation, to institute any legal or administrative ‘
proceeding, to tako any action permitted by law, and to seek and obtain all relief and remedies
(Gnoluding any fines or penaltios), or to adjudicate the rights of othors, as otherwise permitted by
law. : o
O. This Consent Order only applies to poltoies and RPAs covering loss exposures in
California, claims arising within locations in California and California workers. The Consent
Order is not intended to impact policies ot RPAs relating to tisks 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 ef seg, Pursuant to Insurance Code §12968, this Consent Order will be
posted on the CDI’s internet website, : ,
R. This Consent Osder will be intorproted and construed in accordance with California
law, without regard to choice-of-law considerations, . ‘ :
8, 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 arecontingent ‘upon the Insurance Cormmissioner’s approval, which shail be evidenced by the Order
in substantially the form and content as set forth on page 8 hereof.
The CD] and Respondents CIC and AUCRA execute this Consent Order as follows:
Date: A iM 2S 2016 CALIFORNIA DEPARTMENT OF INSURANCE
UX}:
“By: 4 i ‘
MICHAEL J. Ly
DEPUTY GI OUNSEL,
Date: Ara hy, 2016 CALIFORNIA INSURANCE COMPANY
By:
[ Sh Ceetarts
Title O
Date; hyd 2", 2016 APPLIED UNDERWRITERS CAPTIVE RISK
, ASSURANCE COMPANY, INC.
By: Ce
Selaccban
TS itle (_)[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
Coe ID
which they have agreed.
Date: September 6 , 2016
DAVE 2 LC
CALIFORNIA INSURANCE
COMMISSIONERPROOF OF SERVICE
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
I am employed in the county of Los Angeles, State of California. I am over the age of 18
and not a party to the within action. My business address is 5820 Canoga Avenue, Suite 250,
Woodland Hills, California 91367.
On September 16, 2016, I served the foregoing document described as SUR-REPLY IN
SUPPORT OF OPPOSITION TO APPLIED UNDERWRITERS’ MOTION TO STAY
BASED ON INCONVENIENT FORUM on the interested party(ies) in this action as follows:
See Attached Service List
BY ELECTRONIC SERVICE: Pursuant to SFSC Local Rule 2.10(Q), California Rule
of Court §2.253(b)(2) and CCP §1010.6, I caused the documents to be served by
electronic transmission via File & ServeXpress, deemed to be served on this day if e-
served by the close of business day for this Court on the party indicated below.
STATE: I declare under penalty of perjury and under the laws of the State of California
that the foregoing is true and correct.
Executed on September 16, 2016, at Woodland Hills, California.
r 7 7
(Za puuuiuoyer
(Emapplga Beenslakmeljer g
3
SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED’S MOTION TO STAY :COD Oem ND WH BF Bw YY
Ww oN NY NR NY NY RNY DO Bw a
eo UW AA FF OH = SOC HO BWA A FP WN =
Travis Wall
HINSHAW & CULBERTSON LLP
One California Street, 18th Floor
San Francisco, CA 94111
Spencer Y. Kook
HINSHAW & CULBERTSON LLP
633 West 5" Street, 47" Floor
Los Angeles, CA 90071-2043
Jodi S. Cohen
KEESAL, YOUNG & LOGAN
400 Oceangate
Long Beach, CA 90801
Larry Lichtenegger, Esq.
Attorney at Law
3850 Rio Road, #58
Carmel, CA 93923
SERVICE LIST
Attorneys for Defendants
APPLIED UNDERWRITERS, INC.;
APPLIED UNDERWRITERS CAPTIVE
RISK ASSURANCE COMPANY, INC.;
CALIFORNIA INSURANCE COMPANY;
CONTINENTAL INDEMNITY COMPANY;
APPLIED RISK SERVICES, INC,
Tel: (415) 743-3738 | (213) 680-2800
Fax: (415) 434-2533 | (213) 614-7399
E-Mail: twall@mail.hinshawlaw.com
skook@mail.hinshawlaw.com
Attorneys for Defendant
WILLIS OF NEW YORK, INC.
Tel: (562) 436-2000
Fax: (562) 436-7416
E-Mail: jodi.cohen@kyl.com
Attorneys for Plaintiffs
Tele: (831) 626-2801
Fax: (831) 886-1639
E-Mail: lawyer@mbay.net
4
SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED’S MOTION TO STAY
Preview
aa Ww Nicholas P. Roxborough, Esq. (SBN 113540) Joseph C, Gjonola, Esq. (SBN 241955) Ryan R. Salsig, Esq. (SBN 250830) Jaclyn D. Grossman, Esq. (SBN 234992) ROXBOROUGH, POMERANCE, NYE & ADREANI, LLP 5820 Canoga Avenue, Suite 250 Woodland Hills, California 91367 Telephone: (818) 992-9999 Facsimile: (818) 992-9991 Larry J, Lichtenegger, Esq. (SBN 48206) THE LICHTENEGGER LAW OFFICE 3850 Rio Road, #58 Carmel, California 93923 Telephone: (831) 626-2801 Facsimile: (831) 886-1639 Attorneys for Plaintiffs ELECTRONICALLY FILED Superior Court of California, County of San Francisco 09/19/2016 Clerk of the Court BY:DAVID YUEN Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN FRANCISCO 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, v. APPLIED UNDERWRITERS, INC., a Nebraska corporation; APPLIED UNDERWRITERS CAPTIVE RISK ASSURANCE COMPANY, INC., an Towa corporation; CALIFORNIA INSURANCE COMPANY, a California corporation; CONTINENTAL INDEMNITY COMPANY, an Iowa corporation, APPLIED RISK SERVICES, INC., a New York corporation; WILLIS OF NEW YORK, INC., a New York corporation; and DOES | through 50, inclusive, Defendants. Case No. CGC-16-551614 SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED UNDERWRITERS’ MOTION TO STAY BASED ON INCONVENIENT FORUM Complaint filed: April 22, 2016 SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED’S MOTION TO STAYPlaintiffs hereby file this surreply to make the Court aware of the consent decree entered between the Applied Defendants in this case and the California Department of Insurance. In the Stipulated Consent Cease and Desist Order, agreed to by Applied Underwriters Captive Risk Assurance Company, Inc. (‘AUCRA”) and California Insurance Company (“CIC”), AUCRA and CIC agreed to “cease and desists from issuing new RPAs or renewing existing 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 the requirements of Insurance Code § 11658 and § 11735 and all other applicable statutes and regulations, and the RPA has not been disapproved.” [Consent Order, p. 3]. The order was signed on September 6, 2016. A true and correct copy of the Stipulated Consent Cease and Desist Order is attached hereto as Exhibit A. DATED: September 16, 2016 ROXBOROUGH, POMERANCE, NYE & ADREANI, LLP am alae ee AS P. ROXBOROUGH JQSEPH C. GIONOLA RYAN R. SALSIG JACLYN D, GROSSMAN and LARRY J. LICHTENEGGER Attorneys for Plaintiffs By 2 SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED’S MOTION TO STAYEXHIBIT “A”ee pa aS le pe gee ecUW A A FR BS Se S Ce 2 A OH aR wed BEFORE THE INSURANCE COMMISSIONER OF THE STATE OF CALIFORNIA. In the Matter of the Certificates of File No,: MI-2015-00064 Authority of ata CALIFORNIA INSURANCE COMPANY STIPULATED CONSENT CEASE AND and APPLIED UNDERWRITERS DESIST ORDER CAPTIVE RISK. ASSURANCE COMPANY, INC. * : Respondents, . The California 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 (Consont Order) and CIC : and AUCRA! consent to the issuance of this Consent Order by the Insurance Commissioner pursuant to the terms set forth below, : : L 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 Agreoments 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 Order to Cease and Desist from Issuance or Renewal of Workers’ Compensation Trisurance Policies and i Nothing i in this Consont Order shall be construed as an admission by CDI that CIC and AUCRA aro nota single - entity for purposes of the Commissioner's Order in In the Matter of the Appeal of Shasta Linen Supply, Inc., CDT File No, ABB-WCA-14-31. ?we YN A ew PR wD See ee ee Re ee co WA A ROW NY HE So Collateral/Aneillary Agreements in Violation of Insurance Code §§11658 and 11735 and California Code of Regulations, Title 10, Sections 2251 and 2268 dated July 13, 2016 (the Atended 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, 7 2016, agree to the torms set forth in this Consent Order, C. The CDI, CIC and AUCRA agree that the tertas of this Consent Order do not constitute an admission or agreement by cle or AUCRA as to mattors alleged in the Notice and * the Amended Notice, 0 RECITALS A. The Notice and Amended Notice allege 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 Comtnissionor issued a Decision & Order in Jn the Matter of the Appeal of Shasta Linen Supply, Inc., CDI File 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 jllogal 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 CDIin compliance with Insurance Code §§11658 and 11735 and California Code of Regulations, Title 10, §2268 and former §2218. ©, The Decision and Order in Shasta Linen was made precedential pursuant to _ Government Code §11425.60(b). _ D. CIC disagrees with the findings in the Shasta Linen Decision & Order and it has filed a Verified Petition for a Petomptory Writ of Mandate and Complaint for Declaratory and : Tnjunctive Reliof, Los Angeles County Superior Court Case No. BS 163243 (the Writ Proceeding), which challenges the Shasta Linen Decision & Order, Me ,wet A we wD Doe oe ee Pee ee Ss Sea QA a REGS Bos It DEEINITIONS A. The tetra RPA means (i) the RPA form issued to Shasta Linen Supply, Inc. that was the subject of the Decision & Order in Shasta Linen for which the current term of the RPA has not expired or (i) any form of RPA that is substantially similar to the RPA ismued to Shasta Linen Supply, Ino. and that is ancillary or collateral to a guatanteed cost workers’ compensation. insurance policy that covers claims by California workers arising within locations in California and/or employees employed in facilities in California, ot 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-California employees that are covered by anon-Califoria workers' compensation policy, : B, The,term “Policy” or 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 eanployed i in facilities in California or- workers whose employment is otherwise oovered'under California workers’ compensation laws, regardless of where CIC and an employer ontored the contract, for which the RPA éxpited 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 workors' compensation policy. : Iv AGREEMENT A, CIC and AUCRA will ceuse and desist from issuing new RP.As of renewing oxisting RPAs with respect to a California Policy until such time as the RPA hes been submitted to the WCIRB and the CDI in compliance vith the requirements of Insurance Code §11658 and §11735 and all other applicable statutes and regulations, and the RPA has not been disapproved, B, Notwithstanding Paragraph IV (A) above, CIC may renew a Policy issued in connection with an RPA in‘force as of July 1, 2016.Co mI DAA RY DN a Se AAA PR DP AS C, Arbitrations under either an RPA that is currently an in-force RPA ot a past RPA : entored 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. jorminition, 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. B, CDI actuaries, on the one hand, and CIC and AUCRA actuaries on the other hand, will immediately meet and confer for the purpose of determining and agrecing ‘upon modified loss development factors (LDFs) to be used in connection with the Policies, Upon agreement among the actuaties as to modified LDPs, which may include the current LDFs, those LDFs will apply to the Policios and RPAS, F. If CDI actuaries and CIC and AUCRA actuaries ate able to agree on modified LDFs, as referred to in Paragraph (IV) (B), then no hating will be held on the Amended Notice, and this matter will be concluded. If the CDI actuaries aud CIC and AUCRA aotuaries are unable to agree on modified LDFs, or if the Insurance Coramissioner does not approve an agreement by the parties, the hearing 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 (AUB), or as set by AHB. G. [fan agreement among actuaries as specified in Paragraph LV (F) is not reached, CIC and AUCRA agree that nonetheless the amondmonts to RPAs that are specified in Paragraph Iv (©) and IV (D) of this Consent Order will nevertheless romain in force. ; H. Notwithstanding Article 'V. A, AUCRA may issue or renow RPAs and CIC may issue or renew Guaranteed Cost Policies in conneotion with RPAs ifa final judgment has been entered in the Writ Proceeding which determines that (i) the RPA is not a collateral or ancillary agreement subject to the requiroments of Insurance Code §11658 and applicable regulations; (ii) tho RPA is not subject to the filing requirements of Insuranoe Code §11735; and (tit) the RPA is -not otherwise subject to filing requitements of the Insurance Code,ome RN Aw eR Bw BY ea a ka Se Wa ar 2H CS 20 I IfCIC or AUCRA obtain a preliminary injunction in the Writ Proceeding on the _ grounds specified in Paragraph IV (H), above, CIC and AUCRA agree to meet ‘and confer with the CDI to determine whether such reliof should cause the parties to agreo to stay this Consent Order pending the outcome of the Writ Petition on the merits. CIC and AUCRA acknowledge ‘that the CDI does not concede that injunctive relief is an appropriate remedy in the Writ Proceeding, . , : J, Ifa final judgment of the hature specified in Paragraph IV (H) above is entered, CIC and AUCRA nonetheless agree that the amendments to RPAs that aro specified in Paragraph. IV(C) and IV) of this Consent Order will remain in force, and (i) if CDI actuaries‘and CIC and AUCRA actuaries agree upon loss development factors as provided for in Paragraph IV(E) 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. CIC 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 ensuro that a renotice of the hearing would both be served after tho hoaring 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 tlie other hand, will confer as to tho relief sought by CIC end AUCRA in the Motion for Stay to ensure that any stay order that may be issued does not modify or negate any of the texms of this Consent Order, , ; L, This Consent Order only pertains to the proceeding notlced and matters set forth dn 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.)ee I A Ww AY wD M, Nothing in this Consent Order prevents CIC from issuing standalone Guaranteed Cost Policies that have been subtnitted 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 entoted ints, N.. Nothing in the Consent Order limits or affects tho tights of the Insurance Commissioner in connection with the Writ Petition or Shasta Linen and, except as otherwise specified in Article IV. D, B, F, and J above, nothing in this Stipulated Agrooment affeots-or: limits the powers or tights of the Insurance Commissioner to contend or declare that RPAs (other than RPAs that are filed with the WCIRB and tho CDI and that are not disappioved) are unenforceable, void, voidable, or illegal and nothing limits the powers or rights of the Insurance Cotamissioner to initiate or make any investigation, to institute any legal or administrative ‘ proceeding, to tako any action permitted by law, and to seek and obtain all relief and remedies (Gnoluding any fines or penaltios), or to adjudicate the rights of othors, as otherwise permitted by law. : o O. This Consent Order only applies to poltoies and RPAs covering loss exposures in California, claims arising within locations in California and California workers. The Consent Order is not intended to impact policies ot RPAs relating to tisks 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 ef seg, Pursuant to Insurance Code §12968, this Consent Order will be posted on the CDI’s internet website, : , R. This Consent Osder will be intorproted and construed in accordance with California law, without regard to choice-of-law considerations, . ‘ : 8, 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 arecontingent ‘upon the Insurance Cormmissioner’s approval, which shail be evidenced by the Order in substantially the form and content as set forth on page 8 hereof. The CD] and Respondents CIC and AUCRA execute this Consent Order as follows: Date: A iM 2S 2016 CALIFORNIA DEPARTMENT OF INSURANCE UX}: “By: 4 i ‘ MICHAEL J. Ly DEPUTY GI OUNSEL, Date: Ara hy, 2016 CALIFORNIA INSURANCE COMPANY By: [ Sh Ceetarts Title O Date; hyd 2", 2016 APPLIED UNDERWRITERS CAPTIVE RISK , ASSURANCE COMPANY, INC. By: Ce Selaccban TS itle (_)[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 Coe ID which they have agreed. Date: September 6 , 2016 DAVE 2 LC CALIFORNIA INSURANCE COMMISSIONERPROOF OF SERVICE STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) I am employed in the county of Los Angeles, State of California. I am over the age of 18 and not a party to the within action. My business address is 5820 Canoga Avenue, Suite 250, Woodland Hills, California 91367. On September 16, 2016, I served the foregoing document described as SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED UNDERWRITERS’ MOTION TO STAY BASED ON INCONVENIENT FORUM on the interested party(ies) in this action as follows: See Attached Service List BY ELECTRONIC SERVICE: Pursuant to SFSC Local Rule 2.10(Q), California Rule of Court §2.253(b)(2) and CCP §1010.6, I caused the documents to be served by electronic transmission via File & ServeXpress, deemed to be served on this day if e- served by the close of business day for this Court on the party indicated below. STATE: I declare under penalty of perjury and under the laws of the State of California that the foregoing is true and correct. Executed on September 16, 2016, at Woodland Hills, California. r 7 7 (Za puuuiuoyer (Emapplga Beenslakmeljer g 3 SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED’S MOTION TO STAY :COD Oem ND WH BF Bw YY Ww oN NY NR NY NY RNY DO Bw a eo UW AA FF OH = SOC HO BWA A FP WN = Travis Wall HINSHAW & CULBERTSON LLP One California Street, 18th Floor San Francisco, CA 94111 Spencer Y. Kook HINSHAW & CULBERTSON LLP 633 West 5" Street, 47" Floor Los Angeles, CA 90071-2043 Jodi S. Cohen KEESAL, YOUNG & LOGAN 400 Oceangate Long Beach, CA 90801 Larry Lichtenegger, Esq. Attorney at Law 3850 Rio Road, #58 Carmel, CA 93923 SERVICE LIST Attorneys for Defendants APPLIED UNDERWRITERS, INC.; APPLIED UNDERWRITERS CAPTIVE RISK ASSURANCE COMPANY, INC.; CALIFORNIA INSURANCE COMPANY; CONTINENTAL INDEMNITY COMPANY; APPLIED RISK SERVICES, INC, Tel: (415) 743-3738 | (213) 680-2800 Fax: (415) 434-2533 | (213) 614-7399 E-Mail: twall@mail.hinshawlaw.com skook@mail.hinshawlaw.com Attorneys for Defendant WILLIS OF NEW YORK, INC. Tel: (562) 436-2000 Fax: (562) 436-7416 E-Mail: jodi.cohen@kyl.com Attorneys for Plaintiffs Tele: (831) 626-2801 Fax: (831) 886-1639 E-Mail: lawyer@mbay.net 4 SUR-REPLY IN SUPPORT OF OPPOSITION TO APPLIED’S MOTION TO STAY