Company Barred From Selling Liability Coverage : Insurance: Peoples Assurance Cooperative Inc. is accused of not having enough money to pay auto accident claims.

A Superior Court judge on Thursday ordered Peoples Assurance Cooperative Inc. to temporarily stop selling automobile liability coverage.

Judge Ronald L. Bauer also ordered the Fullerton company not to spend money for anything but payment of legitimate claims from members, the salaries of non-management employees and day-to-day bills. Bauer said he will rule Dec. 22 on whether his order should be modified or extended until a hearing can be held to determine if Peoples Assurance is operating improperly.

The Orange County district attorney’s office on Wednesday filed charges against the company accusing it of operating an illegal insurance business and being unable to demonstrate that it has enough money to pay members’ auto accident claims.

Wilbur Piercy, president of Peoples Assurance, said at Thursday’s hearing that his 1,325-member self-insurance pool is not an insurance company according to the state’s definition.

Peoples Assurance’s attorney, Gregory L. Parkin, said that except in the case of one disgruntled member who filed a claim in April for an accident that occurred in March, all legitimate claims have been paid and no member has complained about Peoples Assurance’s operation.

The company provides as much as $35,000 in automobile liability coverage to its members from its pool of membership fees, Parkin said. It charges $600 a year for the coverage, he said, plus a onetime membership fee of $150.

Members are not at risk of losing liability coverage, Parkin said, because Peoples Assurance has an agreement with Transport Risk Ltd. to make payments if Peoples Assurance cannot. He too argued that Peoples Assurance is not an insurance company under state rules because members have joined together to insure themselves, thus avoiding the higher fees charged by large insurance companies.

But Deputy Dist. Atty. Jane L. Shade said Peoples Assurance is an insurance company in every way except in name. By flouting state Department of Insurance licensing requirements, she said, the company is operating without any assurance to members that it has the money to pay future claims.

During a hearing in April, a deputy insurance commissioner found that Peoples Assurance had about $50,000 in assets. Peoples Assurance submitted documents showing that Transport Risk had about $31 million in assets.

“The problem is not only does it appear we have severe uncertainties about Peoples Assurance Cooperative, with $50,000, (but) the largest chunk of Transport Risk’s assets are in an art collection,” Shade said, “and Transport Risk does not own the art collection.”

In court documents, Peoples Assurance valued the art collection at $29 million. It also said Transport Risk owns $375,000 in government bonds from Panama, plus $120,000 due in interest.

Peoples Assurance has filed papers saying that Transport Risk is a registered corporation in the Turks and Caicos Islands in the British West Indies. But Shade said she has been unable to locate the company or determine whether it is licensed to sell insurance.

Parkin conceded that not all of Transport Risk’s assets can immediately be turned into cash. But the assets are there if needed, he said.

Named in the suit against Peoples Assurance are Piercy and company officers Todd Johnson and Frank Hodge. Also named are Transport Risk Ltd.; CDS Enterprises, which allegedly brokered the insurance; Charles David Snyder, owner of CDS; and Kelly R. Kohoutek, who allegedly marketed the insurance.

Kohoutek said Thursday that it has been more than a year since he enrolled anyone in Peoples Assurance.