Overreach Reaches across State Lines in (frankly) Incredible Series of Events as Insurer Files Federal Lawsuit Against California Regulators.

AuthorAcunto, Steve

That's a long headline, but the story is complicated and the risk of mis-emphasis and incompleteness are possible here.

Here is how the latest episode in this war saga unfolds. The Office of the Superintendent of Insurance in New Mexico just ordered California Insurance Company of New Mexico (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. In response, CIC filed suit in California Federal Court to enjoin the California Insurance Department (CDI) from continuing to take what the suit asserts are illegal, vindictive actions to block the approved redomestication of CIC and to undermine the A rated, financially sound insurer by instituting a conservatorship to gain control of CIC. A conservatorship is a take-over mechanism used typically for financially troubled companies, not for top-rated, fiscally prudent, and asset rich insurers.

With me so far?

The Federal law suit, filed in United States Federal Court, Eastern District, California, names CDI staff leaders in their official capacities, charging the Department officials

with violation of the Commerce Clause of the United States Constitution, violation of the Company's right to due process, and sets the basis for a demand for compensation for losses resulting from damages caused to the Company by the CDI defendants' illegal manipulation and control of its assets under the conservatorship.

In its suit, CIC charges the Insurance Commissioner and the other officials named with "unlawful" and "bad faith" action in imposing an arbitrary, illogical and illegal conservatorship of CIC to obstruct its New Mexico redomestication, after that move was approved by several states, including California, before CDI's surprise, abrupt "about face" in seeking an order to grant themselves-the CDI- the conservatorship, and failing to disclose to the court the Commissioner's earlier participation in and approval of the redomiciling or of his earlier representation that the move "presented no risk to California policyholders." Since then, the suit states, the CDI named defendants have continued to wage a bad faith campaign to harm CIC by prohibiting the Company from transferring its assets and its business to New Mexico in compliance with the approved redomestication and the Order of New Mexico's Superintendent of Insurance in October of 2019.

The suit...

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