Category: Daily News

The San Mateo County Superior Court issued an order appointing the California Department of Insurance’s Conservation and Liquidation Office as conservator of California Insurance Company (CIC) and directing the conservator to take immediate possession of the workers’ compensation insurer in response to the company’s willful violation of state law and established pattern of continually flouting California’s regulatory processes.

The Department of Insurance sought the order after company officials unilaterally and illegally attempted to merge its business with a New Mexico-based insurer without first securing the Department’s prior approval.

The order also blocks the attempted merger, which seeks to divest California of its regulatory oversight over this entity. If CIC is permitted to consummate this illegal transfer, CIC employer policyholders, employees with serious work-related injuries and other claimants entitled to vital and necessary insurance benefits, will be left holding policies of a non-admitted insurer not qualified to transact insurance in California.

Effective immediately, the Department of Insurance’s Conservation and Liquidation Office will serve as conservator to protect the company’s existing policyholders and covered workers from an insurer attempting to operate without the approval and authority to continue to transact insurance in California.

The conservator will, to the fullest extent of the law, ensure that California Insurance Company policyholders remain covered under their existing policies and retain the full protections provided to them under California law.

This action follows an established pattern and practice by company officials of illegal actions, misrepresentations, and willful disregard for the authority of the Department of Insurance and other states’ regulators:

— In 2016, the Department of Insurance issued a precedential decision In the Matter of the Appeal of Shasta Linen Supply, Inc. stating that California Insurance Company (CIC) “created a product to circumvent California’s statutory and regulatory requirement; a product that ultimately enriched CIC at the expense of California employers.”
— The Department subsequently served California Insurance Company officials with a Cease and Desist Order for selling unapproved workers’ compensation policies to unsuspecting business owners in what amounted to a “bait and switch” scheme.
— Other states including Vermont, Wisconsin, New York, and New Jersey have also taken regulatory actions against the same company officials’ affiliated companies for engaging in similar unapproved transactions within those states.

While the Department of Insurance was in the process of reviewing the company’s application for sale, on October 9, with less than 48 hours’ notice to California, company officials attempted to transfer the ownership of California-domiciled California Insurance Company to a New Mexico entity called “California Insurance Company II.”

The California Department of Insurance denied an application for approval of the sale of California Insurance Company on October 18, citing, among other reasons, the applicants’ abrupt and unilateral attempt to merge the company with a New Mexico-based entity without seeking or obtaining California’s prior approval.

California law is unequivocal in giving the Department of Insurance the responsibility and power to review transactions of California-based insurers in order to protect policyholders and the public. No company can evade this authority if it wants to sell insurance in this state.

Drug law enforcement officers from China and the United States will jointly brief the media on Thursday on a fentanyl smuggling case, in an unusual disclosure of rare Sino-U.S. cooperation in cracking down on fentanyl crimes.

China’s National Narcotics Control Commission and enforcement officers from both countries will give “detailed information” at a press conference in Xingtai city in northern Hebel province about a fentanyl smuggling case that was jointly uncovered by both sides, according to a notice circulated by the State Council Information Office.

Reporters will also be able to view a live broadcast of the trial at the Xingtai court, before the press conference.

Fentanyl is a cheap, relatively easy-to-synthesize opioid painkiller 50 times more potent than heroin that has played a major role in a devastating U.S. opioid addiction crisis.

U.S. officials say China is the main source of illicit fentanyl and fentanyl-related substances that are trafficked into the United States, much of it through international mail. China denies that most of the illicit fentanyl entering the United States originates in China.

U.S. President Donald Trump accused Chinese President Xi Jinping in August of failing to meet his promises to crack down on the deluge of fentanyl and fentanyl analogues flowing into the United States. China labeled that “blatant slander”.

The dispute over fentanyl comes with the United States in the middle of a major trade dispute with China.

China’s National Narcotics Control Commission said in September that Sino-U.S. cooperation on investigating and prosecuting fentanyl-related substances was “extremely limited”, even though counter-narcotics law enforcement departments from both sides had long maintained a good cooperative relationship.

The sudden show of cooperation announced on Tuesday coincides with intense bilateral negotiations over a phase-one trade agreement which Trump said he hoped to sign with Xi.

Now that the dust has settled on AB-5, the new law that classifies more independent contractors as employees, industries that are expected to be affected include: golf caddies, exotic dancers, some freelance journalists, cable installers, bartenders, and most delivery drivers. The Recording Industry Association of America, and the American Association of Independent Music. AB5 could make workers, including producers, engineers, musicians, publicists and background vocalists, full-time employees.

According to the Freelancing in America survey, there is a reported 57 million American freelancers contributing an excess of $1 trillion dollars to the economy each year. And California based freelance writers are now cast as industry pariah by some employers.

The Hollywood Reporter stated many publications are going to avoid working with California freelancers to avoid potential lawsuits. They’ve admitted to already seeing SEO, transcription and writing job notices explicitly state California freelancers won’t be considered.

The exemption for freelance journalists contains what some say is a potentially career-ending requirement for a writer to remain a freelancer: If a freelance journalist writes for a magazine, newspaper or other entity whose central mission is to disseminate the news, the law says, that journalist is capped at writing 35 “submissions” per year per “putative employer.” At a time when paid freelance stories can be written for a low end of $25 and high end of $1 per word, some meet that cap in a month just to make end’s meet.

Amy Lamare, who writes for money site Celebritynetworth.com and YourTango.com, adds, “Everyone’s freaking out, like my anxiety is going through the damn roof.”

Many publications that employ California freelancers aren’t based in the state and it’s not clear how AB 5 will affect them. Still, some are choosing to opt out entirely. Indeed, several freelance writers who spoke to THR say that various out-of-state employers – some with offices in California – have already told them they’re cutting ties with California freelancers.

“I have heard from clients that they’re just going to avoid working with California freelancers,” freelance entertainment writer Fred Topel says (Topel chose not to name those clients in case they change their minds). THR has additionally reviewed several job notices in transcription, blogging and SEO writing that have explicitly stated that California freelancers will not be considered.

Large California-based news media brands are still figuring out the logistics of how to comply with the law. Asked how he plans to handle the implementation of AB 5 next year, San Diego Union-Tribune publisher and editor-in-chief Jeff Light says, “We’re in the process of sorting through the implications right now. Unfortunately, I suspect a number of freelancers will end up with less work from us as a result of the 35-piece limit. I don’t have anything more detailed than that at this point.”

Of the freelancer exemption, San Francisco Chronicle publisher Bill Nagel says, “This was a poorly considered part of the law, likely based on a fundamental misunderstanding of why companies use freelancers. There are situations in which we cannot make a freelancer an employee, which inhibits our First Amendment rights as a publication. It also seems odd and problematic that broadcast freelancers are treated differently than their colleagues in print media. Unfortunately, AB 5 will limit opportunities for some freelancers and silence a number of voices in the market. We will, of course, comply with the law.”

Meanwhile, national outlets are remaining mostly silent publicly. The Los Angeles Times – which just negotiated its first newsroom union contract – The New York Times, The Washington Post, The Wall Street Journal and Southern California News Group (which owns the O.C. Register and Los Angeles Daily News) declined to comment. USA Today owner Gannett, which has freelancers at papers in California, and movie website Rotten Tomatoes, which is based in Los Angeles, did not respond to requests for comment.

A Hawthorne man was found guilty by a jury of 14 federal felonies for intentionally driving his family off a wharf and into the water at the Port of Los Angeles in a scheme to collect money on insurance policies he had taken out on their lives.

Ali F. Elmezayen, 45, was found guilty of four counts of mail fraud, four counts of wire fraud, one count of aggravated identity theft, and five counts of money laundering.

According to the evidence presented at his nine-day trial, Elmezayen bought from eight different insurance companies more than $7 million worth of life and accidental death insurance policies on himself and his family. Elmezayen paid premiums in excess of $6,000 per year for these policies – even though he reported income of less than $30,000 per year on his tax returns. Elmezayen began purchasing the insurance policies the same year he exited a Chapter 11 bankruptcy proceeding.

After purchasing the policies, Elmezayen repeatedly called the insurance companies – sometimes pretending to be his wife in whose name he had obtained some of the policies – to verify that the policies were active and that they would pay benefits if his wife died in an accident. Elmezayen also called at least two of the insurance companies to confirm they would not investigate claims made two years after the policies were purchased. These telephone calls were recorded and were played for the jury.

On April 9, 2015, 12 days after the 2-year contestability period on the last of his insurance policies expired, Elmezayen drove a car with his wife and two youngest children off a wharf at the Port of Los Angeles. The site of the crash was a loading dock and worksite for commercial fishermen.

Elmezayen swam out the open driver’s side window of the car. Elmezayen’s wife, who did not know how to swim, escaped the vehicle and survived when a nearby fisherman threw her a flotation device. Two of the couple’s three sons, who were 8 and 13 and who were both severely autistic, were strapped into the car and drowned. The third son was away at camp at the time and was not in the car at the time his father drove it into the water.

Elmezayen repeatedly lied – to law enforcement officers, insurance companies, and in subsequent civil litigation he filed concerning the crash – about the extent of the insurance he had purchased on his family, and specifically about whether he had insured his disabled children’s lives. The evidence at trial also showed that he attempted to persuade witnesses to falsely tell law enforcement that he had given the insurance proceeds to charity.

Elmezayen then collected more than $260,000 in insurance proceeds from Mutual of Omaha Life Insurance and American General Life Insurance on the accidental death insurance policies he had taken out on the children’s lives. He used part of the insurance proceeds to purchase real estate in Egypt as well as a boat.

Prosecutors argued that Elmezayen was an abusive husband and parent who “hatched a plan” to make all of his financial problems disappear.

Elmezayen will face a statutory maximum sentence of 212 years in federal prison.

School bus driver Colleen Knowles sought workers’ compensation from her employer, Mountain Empire Unified School District.

The District is a self-insured employer under the workers’ compensation scheme, and its workers’ compensation claims are administered through the San Diego County Schools Risk Management Joint Powers Authority. The JPA purchased excess workers’ compensation insurance to cover claims exceeding a set retention. The District is an additional insured under those policies.

When a dispute over compensation arose, Knowles and the District sought adjudication before the Workers’ Compensation Appeals Board. An administrative law judge ultimately approved their stipulation that Knowles suffered a “specific” injury on May 6, 2003.

The distinction between a “cumulative” and a “specific” injury matters for determining which of JPA’s excess insurance policies was triggered. As JPA’s excess insurer during the stipulated injury date, Kemper Insurance Company indemnified the JPA until it went insolvent. The JPA then approached California Insurance Guarantee Association, a statutorily created insolvency insurer of last resort, to make up what Kemper had failed to pay.

But CIGA is only obligated to pay “covered claims,” defined to exclude claims for which other insurance is available. On this basis CIGA denied coverage, asserting Knowles suffered a cumulative injury, which meant that JPA might recover from a different excess insurer (other than Kemper).

CIGA then sued the JPA and the District for declaratory relief, asserting that because Knowles suffered a cumulative injury, JPA’s claim was not a “covered claim.” In their cross-complaint, defendants sought reimbursement from CIGA of benefit payments made to Knowles after Kemper went insolvent.

The trial court granted both of Defendants motions for summary judgment on the complaint and cross-complaint. and entered judgment in their favor, requiring CIGA to reimburse $129,836.91 plus costs. CIGA appealed that decision.

Central to the court’s ruling, and to CIGA’s appeal, is a jurisdictional question: Does the superior court have jurisdiction to find that Knowles suffered a cumulative injury even if this conflicts with the stipulation before the WCAB, or is injury characterization an issue within the WCAB’s exclusive jurisdiction? The court granted defendants’ motions because it believed the WCAB had exclusive jurisdiction to decide the nature of Knowles’s injury. The Court of Appeal agreed that it did, in the published case of CIGA v the San Diego County Schools Risk Management Joint Powers Authority.

Although this issue appears to be one of first impression in California, federal courts have rejected WCAB exclusivity in similar cases involving excess workers’ compensation insurance. (San Francisco BART Dist. v. General Reinsurance Corp. (N.D.Cal. 2015) 111 F.Supp.3d 1055, 1074 (BART I), affirmed (9th Cir. 2017) 726 F.App’x. 562 (BART II); San Diego Cty. Schs. Risk Mgmt. Joint Powers Auth. v. Liberty Ins. Corp., et al. (2018) 339 F.Supp.3d 1019, 1030 (Liberty).)

The Court of Appeal we agreed with these authorities and concluded, based on the purpose of excess insurance, that the superior court has jurisdiction to characterize Knowles’s injury in this action differently than was reflected in the WCAB stipulation.

Accordingly, it reversed the judgment and direct the trial court to enter a new order denying defendants’ motions for summary judgment.