The California Insurance Company (CIC) Weighs Options Following Latest Turn in Six-Year Battle with California Department of Insurance (CDI)

Closely watched litigation pits the insurer in opposition to overreaching regulatory actions to block its redomestication out of California, as the State's insurance market suffers unavailability and extraordinarily high pricing

OMAHA, Neb., June 30, 2025 /PRNewswire/ -- In a surprising decision that will reverberate throughout the insurance industry nationwide, the six-year-long legal battle between the California Insurance Company (CIC) and the California Department of Insurance (CDI) has taken a new turn when a state appellate court ruled, not atypically, to support the position of the State's regulatory entity. CIC is now mulling its options on how to reach a just and apolitical conclusion to the matter that has been watched by the California insurance community and other companies and brokers across the nation who underwrite insurance in California—today, among the most troubled states for insurance in the country.

The dispute hinges on the CDI's actions in 2019 when it placed CIC arbitrarily into conservation, despite the Company's strong capital position and A+ rating, for non-financial reasons to block its redomestication to another state. The position of the CDI before the appellate court was that the Insurance Commissioner has virtually unlimited and unfettered discretion in dealing with insurance companies with the power to place any insurance company in conservation for any claimed violation of the Insurance Code regardless of the insurance company's financial position.

CIC's position was that the CDI should follow the law, and that its actions were and continue to be unlawful. The appellate court sided with the CDI, going even further and expanding the CDI's powers, essentially making them unreviewable. This sets new law and reverses prior precedent set forth by the appellant.

Reflecting upon the matter which has continued for six years, Mr. Jeffrey Silver, Executive Vice President and General Counsel for CIC for the first time recounted the events leading up to the current day, explaining how, in 2019, fed up after a long period of unresponsive bureaucracy and delay tactics, CIC decided to redomesticate out of the State of California: "The authority to move was granted in an official hearing on October 9, 2019. Numerous regulators were in attendance. None, including the CDI, voiced any concerns or objections. But then, apparently because of last-minute regret or perhaps opportunism, the CDI two weeks later requested that CIC reconsider its decision to leave California and hold off on filing a final piece of paper with the Secretary of State of California which would have completed the redomestication. CIC acted in good faith and, in cooperation, agreed to pause. Shortly thereafter, on November 4th, the CDI in a surprise ex parte proceeding (that is, with no notice given to CIC and without CIC present at the hearing) placed the Company into conservation."

Mr. Silver continued, "We were deceived. Had we just filed that one piece of paper with the Secretary of State, we could have avoided this entire mess. Regardless of the justification now offered by the CDI for its actions, they are clearly shown to be fake by a few simple, irrefutable facts: at that time, the Company was A+ rated and was, and remains, excessively capitalized; the Company had and still has a solid record of resolving claims more than twice as fast as the industry; and, over the tens of thousands of policies and tens of thousands of adjusted claims, the Company has had close to zero policyholder complaints, and exactly zero claimant complaints."

Mr. Steve Menzies, Chairman and Founder of the Company, explained that CIC is one of nine operating insurance companies in a broader corporate ownership group, and that only CIC was ever domesticated in California: "We have long since shifted all of our business to the other carriers in our group. The approved conservation plan to settle this matter is not material financially to CIC, and especially not to the overall corporate group. Nevertheless, operating with one of the member carriers so encumbered is burdensome and expensive."

"Since 2019, our group of affiliated companies and related businesses has grown substantially and profitably across the U.S. and internationally, including our growing presence in the EU. In fact, we are now at our largest and most profitable ever in our over 30-year history," Mr. Menzies added.

He also emphasized that this latest court decision sends "a chilling message" to those companies and brokers left in the California insurance marketplace, a marketplace in which he points out: "Excluding the public insurance funds, today (continuing a decades-long trend), close to 90% of the total property and casualty premium written in California is supported by non-domestic insurers. This means the State of California literally has no insurance capital to support its economy. CIC should have been a vibrant participant in California's marketplace, but the State has simply become an untenable place from which to operate, and unlike so many other companies that have pulled out or significantly reduced their presence in California (AIG, GEICO, Allstate, State Farm, Farmers, USAA, Nationwide, Travelers, Chubb, AmGUARD, Hartford, and others), we're still trying to leave after 6 years."

Mr. Menzies concluded: "This ruling reflects a broader pattern of instability in California's regulatory environment. As insurers continue to exit the market, homeowners face shrinking options, higher premiums, and increasingly restrictive terms. The strain extends beyond insurance—even access to basic services like energy and water is increasingly challenged by systemic dysfunction. Unfortunately, the consequences of these systemic issues are borne by the very citizens the state purports to protect. Insurers and policyholders should benefit from a system that encourages fairness and clarity around the rules governing corporate decisions. CIC remains committed to supporting sound insurance practices and looks forward to resolving this matter constructively."

About California Insurance Company (www.nacasualty.com)

California Insurance Company^® (CIC) holds an AM Best Financial Strength Rating of 'A-' (Excellent) and a Long-Term Issuer Credit Rating of 'a-' (Excellent). The rating pertains to CIC and the seven insurance companies collectively referred to as North American Casualty Group (NAC). The companies with the affirmed ratings are: California Insurance Company, Continental Indemnity Company, Illinois Insurance Company and Pennsylvania Insurance Company, domiciled in New Mexico; Texas Insurance Company, domiciled in Texas; Oklahoma Property and Casualty Insurance Company, domiciled in Oklahoma; and Florida Casualty Insurance Company, domiciled in Florida.

About Applied Underwriters (www.auw.com)

Applied Underwriters^® is a global risk services firm that helps businesses and people manage uncertainty through its business services, insurance and reinsurance solutions. As a company, Applied Underwriters has been distinguished by its innovative approaches to client care and by its strong financial strength. Applied Underwriters operates widely throughout the US, UK, EU and Middle East. Its operational headquarters is located in Omaha, Nebraska.

SOURCE Applied Underwriters