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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Operating Leases The Company is obligated under various non-cancellable lease agreements providing for office space, automobiles, and office equipment that expire at various dates through the year 2021. For leases that contain predetermined escalations of the minimum rentals, the Company recognizes the related rent expense on a straight-line basis and records the difference between the recognized rental expense and amounts payable under the leases as deferred rent in other liabilities. This liability amounted to $3.6 million and $4.4 million at December 31, 2015 and 2014, respectively. Total rent expense under these lease agreements was $16.0 million, $14.6 million, and $19.3 million for 2015, 2014, and 2013, respectively. The following table presents future minimum commitments for operating leases as of December 31, 2015:
Year Ending December 31, | Operating Leases
| (Amounts in thousands)
2016 | $ | 14,765 |
2017 | 11,008 |
2018 | 4,684 |
2019 | 1,006 |
2020 | 463 |
Thereafter | 64 |
California Earthquake Authority ("CEA") The CEA is a quasi-governmental organization that was established to provide a market for earthquake coverage to California homeowners. The Company places all new and renewal earthquake coverage offered with its homeowners policies directly with the CEA. The Company receives a small fee for placing business with the CEA, which is recorded as other income in the consolidated statements of operations. Upon the occurrence of a major seismic event, the CEA has the ability to assess participating companies for losses. These assessments are made after CEA capital has been expended and are based upon each company’s participation percentage multiplied by the amount of the total assessment. Based upon the most recent information provided by the CEA, the Company’s maximum total exposure to CEA assessments at April 1, 2015, the most recent date at which information was available, was approximately $64.3 million. There was no assessment made in 2015. Regulatory Matters In April 2010, the California DOI ("CDI") issued a Notice of Non-Compliance ("2010 NNC") to MIC, MCC, and CAIC based on a Report of Examination of the Rating and Underwriting Practices of these companies issued by the CDI in February 2010. The 2010 NNC included allegations of 35 instances of noncompliance with applicable California insurance law and sought to require that each of MIC, MCC, and CAIC change its rating and underwriting practices to rectify the alleged noncompliance and reserved the right to seek monetary penalties. In April 2010, the Company submitted a Statement of Compliance and Notice of Defense to the CDI, in which it denied the allegations contained in the 2010 NNC and provided specific defenses to each allegation. The Company also requested a hearing in the event that the Statement of Compliance and Notice of Defense did not establish to the satisfaction of the CDI that the alleged noncompliance did not exist, and the matters described in the 2010 NNC were not able to be resolved informally with the CDI. While continuing to dispute the CDI's allegations, the Company implemented various changes requested by the CDI and engaged in settlement discussions in the interest of avoiding further litigation. On March 2, 2015, MIC, MCC and CAIC entered into an agreement with the CDI, pursuant to which all allegations in the 2010 NNC were settled for $1 million, which was subsequently paid, and the case was resolved. In March 2006, the CDI issued an Amended Notice of Non-Compliance to a Notice of Non-Compliance originally issued in February 2004 (as amended, "2004 NNC") alleging that the Company charged rates in violation of the California Insurance Code, willfully permitted its agents to charge broker fees in violation of California law, and willfully misrepresented the actual price insurance consumers could expect to pay for insurance by the amount of a fee charged by the consumer’s insurance broker. The CDI sought to impose a fine for each policy on which the Company allegedly permitted an agent to charge a broker fee, to impose a penalty for each policy on which the Company allegedly used a misleading advertisement, and to suspend certificates of authority for a period of one year. In January 2012, the administrative law judge (the "ALJ") bifurcated the 2004 NNC between (a) the CDI’s order to show cause (the "OSC"), in which the CDI asserts the false advertising allegations and accusation, and (b) the CDI’s notice of noncompliance, in which the CDI asserts the unlawful rate allegations. In February 2012, the ALJ submitted a proposed decision dismissing the NNC, based on conduct by the CDI and the Commissioner in violation of the Company's due process rights. Specifically, the ALJ found that the CDI's attorneys and the Commissioner engaged in improper ex parte communication, and commenced a rule making in order to supersede unfavorable evidentiary rulings by the ALJ. The Commissioner rejected the ALJ's proposed decision. The Company challenged the rejection in Los Angeles Superior Court in April 2012, but the challenge was unsuccessful. The Court did not rule on the merits of the ALJ's due process concerns, but merely held that the Company was required to exhaust its administrative remedies before seeking relief in the Superior Court. The case was referred back to the ALJ, and the due process issues raised by the ALJ's dismissal were preserved for later appeal. Following an evidentiary hearing in April 2013, post-hearing briefs and an unsuccessful mediation, the ALJ closed the evidentiary record on April 30, 2014. Although a proposed decision was to be submitted to the Commissioner on or before June 30, 2014, after which the Commissioner would have 100 days to accept, reject or modify the proposed decision, or required further evidence, the proposed decision was submitted on December 8, 2014. On January 7, 2015, the Commissioner adopted the ALJ's proposed decision, which became the Commissioner's adopted Order. The Company received notice of this Order on January 10, 2015. The decision and Order found that from the period July 1, 1996 through 2006, the Company's "brokers" were actually operating as "de facto agents" and that the charging of "broker fees" by these producers constituted the charging of "premium" in excess of the Company’s approved rates. The Order assessed a civil penalty in the amount of $27.6 million against the Company. The Company denies the allegations and/or findings in the Order, and believes that no monetary penalties are warranted. On February 9, 2015, the Company filed a Writ of Administrative Mandamus and Complaint for Declaratory Relief (the "Writ") in the Orange County Superior Court seeking, among other things, to require the Commissioner to vacate the Order, to stay the Order while the Superior Court action is pending, and to judicially declare as invalid the Commissioner’s interpretation of certain provisions of the California Insurance Code. Subsequent to the filing of the Writ, a consumer group petitioned and was granted the right to intervene in the Superior Court action. The court did not order a stay, and the $27.6 million assessed penalty was accrued in 2014 and paid in March 2015. The Company filed an amended Writ on September 11, 2015, adding an explicit request for a refund of the penalty, with interest. The court initially scheduled the matter for hearing on March 14, 2016, with the opening brief due October 19, 2015. The Company filed its opening brief, but the Commissioner then requested an extension of time to file an opposing brief and for the hearing on the Writ. The extension was granted, and the hearing is now scheduled for June 13, 2016. The Company intends to vigorously defend itself against the allegations, and seeks reversal of the $27.6 million assessed fine, unless a reasonable settlement can be reached. The Company has also accrued a liability for the estimated cost to continue to defend itself in the false advertising OSC. Based upon its understanding of the facts and the California Insurance Code, the Company does not expect that the ultimate resolution of the false advertising OSC will be material to the its financial position. Litigation The Company is, from time to time, named as a defendant in various lawsuits or regulatory actions incidental to its insurance business. The majority of lawsuits brought against the Company relate to insurance claims that arise in the normal course of business and are reserved for through the reserving process. For a discussion of the Company’s reserving methods, see Note 1. Summary of Significant Accounting Policies. The Company also establishes reserves for non-insurance claims related lawsuits, regulatory actions, and other contingencies when the Company believes a loss is probable and is able to estimate its potential exposure. For loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. While actual losses may differ from the amounts recorded and the ultimate outcome of the Company’s pending actions is generally not yet determinable, the Company does not believe that the ultimate resolution of currently pending legal or regulatory proceedings, either individually or in the aggregate, will have a material adverse effect on its financial condition, results of operations, or cash flows. In all cases, the Company vigorously defends itself unless a reasonable settlement appears appropriate. The Company is also involved in proceedings relating to assessments and rulings made by the FTB. See Note 10. Income Taxes. There are no environmental proceedings arising under federal, state, or local laws or regulations to be discussed.

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