State Moves for Liquidation of Mission Insurance : Regulator Claims Firm Never Received Cash It Was Promised
California Insurance Commissioner Roxani Gillespie moved Monday to liquidate Mission Insurance Cos., marking what is believed to be the largest such shutdown in the history of the insurance business in the state.
Mission Insurance has been under state conservatorship since Oct. 31, 1985, and its subsidiaries were placed in conservatorship the next month.
No new policies have been written since the companies were placed in conservatorship.
Most of Mission’s outstanding California insurance claims will be turned over to the Los Angeles-based California Insurance Guarantee Assn. for processing and payment. The association, created in 1969, will assess all insurers doing business in California to create a fund to be used in paying off the claims against Mission, industry spokesman George Tye said.
Similar guarantee funds exist in a number of other states, Gillespie said, “and it is assumed that those funds will be triggered as a result of the California liquidation.”
Incentives for Employees
Gillespie said the department has hired William S. Price, former executive vice president of Crum & Forster Insurance Cos., as Mission’s liquidator. She said the work will require “the services of many Mission employees--and we will provide incentives for them to stay with the company.”
Gillespie filed for liquidation orders in Los Angeles County Superior Court, where Judge Ricardo Torres quickly granted her request to take over Mission American Insurance. That company was created by Cincinnati-based American Financial Corp., which is headed by investor Carl Lindner, when it bought a 49.9% stake in Mission Insurance.
Any remaining Mission Insurance policies will be transferred to Mission American and administered by the state under the conservatorship.
American Financial Corp. was to have injected new funds into the operation in an effort to revive Mission Insurance, the state noted in its successful application to take over Mission American. The state claimed that a promised infusion of $40 million was never provided to beleaguered Mission.
It also alleged that Mission American and American Financial “intended to prosper at the expense of Mission Insurance Co. and the various other Mission companies in conservatorship to the detriment of approximately 32,000 claimants and thousands of policyholders.”
Had the state known that the needed funds would not be provided, it would never have licensed Mission American to do business in California, the state said. It added that a financial analysis performed for the Texas Department of Insurance last Sept. 30 concluded that misallocation of costs and expenses at Mission American masked the fact that it was operating with “negative capital and a negative surplus.”
As of that date, Mission reported assets of $164.7 million and liabilities of $612.8 million--or $448.1 million in the red. Its net loss from operations for the nine months ending Sept. 30 was $93.6 million.
The liquidation move followed a protracted effort by both the department and what it called “numerous unaffiliated insurers” to rehabilitate Mission and its subsidiaries: Mission National Insurance and Enterprise Insurance, of Los Angeles, and Holland-America Insurance and Mission Reinsurance of Kansas City, Mo.
Times Staff Writer Kim Murphy contributed to this story.