Applied Underwriters, Inc. and Applied Risk Services, Inc. have filed a lawsuit against Ricardo Lara, the Insurance Commissioner of the State of California, and others in the U.S. District Court for the Eastern District of California. The suit asserts five claims under the U.S. Constitution. California Insurance Company (CIC) is an insurance company that was previously owned by Berkshire Hathaway. After the merger, the California Department of Insurance made official statements that it did not approve the sale of CIC, which was included in the transaction involving  Applied.

The suit alleges that the California Department of Insurance abused its state law authority and acted in bad faith in a manner that caused substantial harm to the Applied family of companies. The companies allege in the complaint that the California Department of Insurance placed California Insurance Company (CIC) in a conservatorship under false pretenses and has abused its authority by trying to force Applied Underwriters to relinquish its rights in connection with the Department's unlawful actions. The Department took the action because the company allegedly engaged in a pattern of trying to disregard California's rules.

During the time it was in the conservatorship, CIC was fully solvent, had an "A" rating, and remained fully committed to its customers. CIC allegedly attempted many good faith efforts to resolve issues with the department.