Insurer for Carson in State Hands : Insolvency: Agency takes over firm covering city employees, says claims will be paid.

Carson employees who chose Pacific Standard Life Insurance Co. for life insurance and retirement savings policies have been notified that the state Department of Insurance has taken over the Davis-based company because it is insolvent.

The state takeover, which occurred Dec. 11, followed a Nov. 28 Insurance Department order to Pacific Standard that it cease business. The move affects about 170 city employees, who together have paid about $313,000 in premiums to Pacific Standard in the last 18 months.

“I’m one of them,” said Nancy Severtson, acting accountant and treasurer for the American Federation of State, County and Municipal Employees, Local 809. “I don’t know what’s happening,” she said.

State and city officials attempted to reassure city employees.

Ed Middleton, the person now running Pacific Standard for the Insurance Department, said in a phone interview that claims and benefits will be paid.

But, he added, no one with a Pacific Standard policy will be able to claim its cash value for six months, although they will have to continue to pay premiums.

Mark Johnson, the city’s financial consultant, said: “As far as we know at this point, the policies are still in effect. . . . The state indicates that they are going to assign the policies to different companies. It doesn’t appear that the individual policies are threatened.”

Middleton said the Insurance Department conducted an examination this fall of Pacific Standard after learning of the financial troubles of Dallas-based Southmark Corp., a large diversified financial services and real estate company that acquired Pacific Standard in 1986.

“The examination was scheduled because we knew the stock was owned by Southmark, and we knew Southmark had problems,” he said.

In July, Southmark became one of the largest companies ever to seek bankruptcy protection.

Middleton said the state’s examination found that Pacific Standard had recently bought second mortgages and junk bonds, which violated state regulations for insurance company investments.

“The relationship with Southmark has created problems for” Pacific Standard, he said.

Johnson said he and the newly appointed finance director, Lorraine Oten, “need to confer with the city attorney and the city administrator” about how Pacific Standard’s troubles will affect Carson employees.

About half of Carson’s 350 full-time employees elected Pacific Standard when choosing life insurance and retirement savings plans.

In Carson, Pacific Standard became controversial two years ago after it was learned that then-City Administrator John Dangleis had steered city insurance business to the firm without telling the City Council that he was affiliated with it as an insurance agent and that he was a friend and business associate of Peter Cobo, an insurance agent for Pacific Standard.