Judge Overturns Ban on Batus’ Bid for Farmers : Insurance Commissioner’s Ruling Called ‘Absurd’

A Los Angeles Superior Court judge Friday overturned as “absurd” the California insurance commissioner’s ruling that state law forbids the purchase of Farmers Group by the U.S. subsidiary of Britain’s BAT Industries.

The subsidiary, Batus Inc. of Louisville, Ky., has offered $4.35 billion for the Los Angeles-based insurance holding company, but Batus must first win regulatory approval in California and the eight other states where Farmers subsidiaries have their headquarters.

Insurance Commissioner Roxani M. Gillespie found Batus unfit to conduct insurance business on the ground that more than 10% of its parent’s stock is owned by government-related agencies based outside the state--mostly public employee pension funds invested in Farmers.

Ohio Approves Takeover

Judge Kurt J. Lewin said the commissioner and Farmers’ strict reading of the law rendered its intent “absurd.” The law, Lewin said, refers only to ownership that grants the governmental agencies involved a “substantial influence over the insurer.” Such is not the case with BAT Industries, he said.

Also on Friday, Batus won the blessing of Ohio insurance regulators. That followed earlier approval by Arizona.

Batus has been rejected in Washington, Idaho and Oregon, but the company plans appeals in all three. Rulings are pending in Kansas and Illinois, and Texas is to begin hearings next month. Farmers does business in 26 states.

A Batus spokesman called Lewin’s ruling “extremely important” because California is not only Farmers’ headquarters but also accounts for 41% of its business.

A spokesman for Farmers said it will appeal both Lewin’s ruling and Ohio’s approval.