New Mexico AG Takes More Steps to Intervene in Conservation of California Insurance Co.
New Mexico Attorney General Hector Balderas has retained California legal counsel on behalf of the state and filed for leave to submit an amicus curiae brief in the conservation proceedings over California Insurance Co.
CIC continues to battle the imposition of a conservatorship by the California Department of Insurance to halt the redomestication, characterizing the CDI’s move as misuse of a conservatorship, typically imposed on distressed carriers in danger of insolvency.
Balderas, who successfully petitioned to file amicus briefs earlier on behalf of CIC in related federal cases, is now seeking to act in light of the problems caused for New Mexico’s regulators in the redomestication process.
The U.S. Court of Appeals for the Ninth Circuit is expected to hear CIC’s appeal in its related federal cases on an expedited basis over the CDI’s objections following an earlier ruling on procedural grounds.
In 2019 CIC, as part of its buyout from Berkshire Hathaway, sought the CDI’s permission to move to New Mexico, while New Mexico held a hearing to approve the change of domicile. Approval was unanimous, including that of CDI officials. CIC had begun to plan its move to New Mexico, when in November California regulators acted to block the move with the imposition of a conservatorship.
A California federal court in April declined to get involved with a lawsuit that Applied Underwriters and the California Insurance Co. filed against the California Department of Insurance.
California Insurance Company of New Mexico filed suit in federal court in January to enjoin the CDI from continuing to take what the suit asserts are illegal, actions to block the approved redomestication of CIC and to undermine a financially sound insurer by instituting a conservatorship to gain control of CIC.
The suit came after the Office of the Superintendent of Insurance in New Mexico ordered CIC either to comply immediately with all regulations required under its approved redomestication to New Mexico or face financial penalties and possible revocation of the Company’s Certificate of Authority.
CDI got approval last year to place CIC in conservatorship and in January CDI filed a follow-up rehabilitation plan that would force CIC to sell its California business to another insurer.
“As A-rated CIC has attempted to complete its redomestication to New Mexico, the CDI has used every means, illegal and otherwise, to block the move, even as recently as its objection to the expedited hearing in the United States Court of Appeals for the Ninth Circuit to further delay a hearing on the merits,” CIC’s Executive Vice President and General Counsel Jeffrey Silver stated. “We seek, after all of these processes, finally to discuss the actual merits before the court despite the CDI’s efforts to the contrary. We were subject to the conservatorship with no hearing or procedural opening to state our case. Together with the appeals in federal court, the actions of Attorney General Balderas reflect the sentiment and opinion of many observers, including the media, that CDI appears to be exercising a ‘vendetta’ against CIC, since New Mexico approved the move, as did the CDI, Iowa, Texas and other states.
According to the documents filed by Balderas, the CDI has answered only that it sought the conservation order because CIC, “attempted to merge its business with a New Mexico-based insurer without first securing the department’s prior approval.”
CIC has argued that CDI officials were present at the administrative hearing in October 2019 in New Mexico and when given the opportunity did not object to the proposed merger. The carrier has also claimed that the CDI’s proposed rehabilitation plan should be considered arbitrary and punitive.
In his filing, Balderas observed that the conservation plan has effectively “forestalled the merger,” and has forced New Mexico officials to threaten regulatory action against the carrier, starting with a show-cause action against CIC, compelling the carrier to finalize its merger and prove it is legally allowed to do business in the state. That action prompted CIC to sue the CDI.
The matter is now proceeding forward in three court actions, two federal, one state.
The CDI issued the following statement on Thursday in response to the Balderas announcement:
“The Department took this conservation action under California law to protect California policyholders and we cannot comment on other states’ regulatory actions.”
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