Insurance Commissioner Orders FGS Liquidated
FGS Insurance Agency, a low-cost auto insurer that has been accused of fraud, will be liquidated by a bankruptcy trustee, Insurance Commissioner John Garamendi said Thursday.
“This is the end of the road for FGS--a road strewn with the wreckage of chiseled policyholders and bilked creditors,” Garamendi said in a statement. “But we will move quickly to clean up this rubble.”
Garamendi, who ordered the seizure of the Irvine insurer in April, filed a lawsuit in February accusing FGS and its former owner, Sidney M. Field, of racketeering, gross mismanagement and breach of fiduciary duties for a transaction that allegedly defrauded Coastal Insurance Co. of $17 million.
The suit seeks a total of $66 million in damages from FGS, Field and some officers and directors of Coastal Insurance, according to Bruce Friedman, the Los Angeles attorney representing Garamendi in the suit.
“We’ll take every action to stop any payment to the insiders and affiliated creditors who helped to perpetrate this scam,” Garamendi said.
Bill Schulz, a department spokesman, said the insurance commissioner will continue to seek monetary damages from FGS and Field, whose broker’s license was revoked in 1987. He said FGS’ assets are estimated to be worth $6 million to $15 million. He would not disclose details of the company’s assets.
“This liquidation will enable us to move more quickly to provide policyholders with some money,” Schulz said. “The important part is we’ve finally revoked the license of FGS so that its officers will not be able to move it around to another shell company, as they have operated in the past, to evade creditors and dupe policyholders.”
FGS had provided car insurance to nearly 200,000 Californians.
Friedman said FGS’ policyholders, as of March 15, were transferred to Ciocatto Insurance Services Inc., a Laguna Hills agency that bought FGS before Garamendi filed his suit. Ciocatto has agreed to pay the court a percentage of the auto insurance renewals it writes. Friedman said that the Department of Insurance will monitor Ciocatto’s compliance with state regulations and that a bankruptcy trustee will be appointed next week.
Last year, the Insurance Department, under former Commissioner Roxani M. Gillespie, accused FGS of fraudulent activities, including misusing the state’s assigned-risk plan, falsifying driver records and hiding commissions and fees.
