Insurance Firm Sues State, Charges Harassment : Regulation: FGS, accused of fraudulent sales practices, says Commissioner Gillespie unlawfully spent state funds to harm the company.

Four days before it faces a state Insurance Department license revocation hearing, a major Southern California auto insurance seller sued Friday for a court order to stop alleged harassment by the department.

FGS Insurance Agency Inc., which has been accused by both Insurance Commissioner Roxani Gillespie and legislative investigators of engaging in a wide range of fraudulent sales practices, charged in the suit filed in Orange County Superior Court that Gillespie has been “unlawfully and wastefully expending state funds to harm FGS.”

The suit came just one day after John Garamendi, the Democratic nominee for insurance commissioner in the November election, said he had broken off a meeting Thursday with two FGS representatives whom he accused of making improper approaches to him.

Garamendi said Harvey Englander, an FGS representative, had offered to raise money for his campaign while urging him to adopt a friendlier attitude than Gillespie has had toward FGS if he is elected. Englander, he said, was accompanied by FGS President Alan Greenberg.

“This company and all those involved in it are suspect in my opinion,” Garamendi declared. “I was shocked to find out that that was what they wanted to talk to me about. When I found out, I told Englander and Greenberg that as commissioner I would proceed appropriately, and I told Englander, ‘If you had any thought of making a contribution, forget it.’ ”

Garamendi added that he knew Englander as a political consultant but had not realized that he was working for FGS when he agreed to the meeting.

Friday, after announcing the filing of the lawsuit to stop Gillespie’s proceedings, Englander contested Garamendi’s account of what had taken place.

“We never said a word about a contribution,” he said. “He has said he wasn’t taking money from insurance companies, so we never brought it up. We did let John know we’d be filing a lawsuit against the Department of Insurance, and we asked for fairer treatment. I would be very stupid if I were to offer him money.”

Offering a campaign contribution in exchange for later governmental action violates state bribery statutes.

In announcing last spring that they were seeking revocation of FGS’ license to operate, Insurance Department regulators accused FGS of selling policies issued by a company not licensed in California, failing to disclose to customers that their premiums were being financed at interest rates ranging up to 40% and failing to disclose to some customers that their insurance was being placed through the assigned-risk system.

The department also cited more than 250 consumer complaints alleging that FGS had misquoted premiums, failed to provide coverage as requested, failed to respond to inquiries, misrepresented benefits, failed to remit premiums in a timely manner and unfairly canceled policies.

FGS, which sells as many as 10,000 policies a month, was a part of Coastal Insurance Co. before that company was liquidated in bankruptcy last year. On Aug. 10, Gillespie filed a civil suit against executives of Coastal asking that they reimburse state liquidators $66 million plus punitive damages, and naming FGS as a conduit for alleged illicit drains of Coastal funds.

The hearing on revoking FGS’ operating license is set to begin Tuesday in Los Angeles and may last several weeks, Insurance Department spokesmen said Friday. They declined to comment on the FGS lawsuit until they had a chance to study it.

The lawsuit alleges that the Insurance Department set up a toll-free hot line for which it solicited calls from FGS customers or prospective customers, according to an FGS statement. Callers are told about punitive actions pending against the company, the suit contends.

Departmental investigators are also accused in the suit of entering FGS facilities without authorization and aggressively soliciting customers on the premises to call them.

The suit seeks a declaration that the authorities are acting unlawfully and asks the courts to issue a restraining order against Gillespie and her aides against further such acts.