Unlicensed ‘Offshore’ Insurance Firm Seized : Government: Garamendi orders 22 firms to stop selling Apex’s auto policies. A critic says insurance commissioner’s actions do not go far enough.

Insurance Commissioner John Garamendi has secured a court order putting the California business of Apex Placement Insurance Co., based in the Caribbean, under a conservatorship, moving for the first time against an unlicensed auto insurer in the state.

He also directed 22 Southern California insurance agencies to stop selling the company’s auto policies.

Although only about 5,000 policyholders and $2 million in annual liability business are involved, the commissioner characterized the moves as only the beginning of an attempt to stop illegal auto insurance sales by so-called “offshore” companies.

However, a Los Angeles attorney who has been seeking a crackdown against such carriers, Douglas Hallett, reacted warily to Garamendi’s announcement, saying the seizure of one small carrier is only “a very modest beginning.”

“It doesn’t address at all the problem of unlicensed physical damage carriers who are the dominant provider of collision and theft coverage in inner-city Los Angeles,” Hallett said. “These are people who are least able to afford the failure of a carrier, yet they continue to be exposed to it.”

The sales of policies by unlicensed carriers have grown in California in the wake of a sharp increase last year in the price of assigned risk insurance and tighter eligibility requirements for such policies.

The changes have sent thousands flocking to buy from unlicensed companies. Some insurance agents do little other business.

Garamendi noted that purchases are legal in cases where insurance from licensed carriers or assigned risk is unavailable, but he said many purchases from the “offshore” insurers occur simply because their premium prices are cheaper.

Some companies have proved unable or unwilling to pay claims, and often are hard for policyholders to reach, operating out of post office boxes on small Caribbean islands.

“Today, we have taken a big step to shut down insurance con artists who have been selling potentially worthless pieces of paper to California consumers,” Garamendi said of the seizure of Apex.

Apex, registered in the Turks and Caicos islands in the British West Indies, is a subsidiary of American Holding Co. of Lexington, Ky.

Officials of neither company could be reached for comment.

Garamendi said a number of insurance agencies in Southern California had sold Apex policies that were “unsafe and potentially worthless.” By putting the company’s California assets under conservatorship, he hopes to save something.

Among the agencies issued cease-and-desist orders to halt sales of Apex policies were Power Insurance Brokerage, Genesis Auto Insurance Services, Golden State Best Insurance Agency and Exodus Auto Insurance Services.

The agencies can contest the order at a June 20 public hearing.

Hallett said that cease-and-desist orders can be contested for a long time. He called upon Garamendi to move, after months of warnings he has been issuing, to revocations of licenses.