A Superior Court judge on Tuesday extended an order he issued earlier this month barring a Fullerton company from selling memberships in its automobile insurance cooperative.
Judge Ronald L. Bauer issued the ban on Dec. 10, one day after the Orange County district attorney's office accused Peoples Assurance Cooperative Inc. of selling insurance without a license. Tuesday's session was to have determined whether the order prohibiting the company from selling further policies should remain in effect until a full hearing can be held to decide whether the company is operating illegally.
But the attorney for Peoples Assurance, Gregory L. Parkin, asked for more time to prepare a response to the district attorney's allegations. Bauer set a Jan. 5 hearing date and extended until then his order for the company not to sell new policies. The order also prohibits the company from spending money for purposes other than to cover ordinary expenses or legitimate liability claims filed by holders of existing policies.
The three Peoples Assurance executives named in the charges--Wilbur Piercy, Todd Johnson and Frank Hodge--may not draw paychecks under the judge's order.
Parkin argued that the charges against Peoples Assurance are groundless because the company does not sell insurance. Instead, he said, the company sells $150 annual memberships in a discount club. For an additional $600 a year, he said, club members receive as much as $35,000 in automobile liability coverage.
The company has about 1,300 members, Parkin said. Except for one woman who protested after Peoples Assurance refused to pay a claim she filed for an accident that occurred a month before she became a member, he said, nobody has complained, and all legitimate accident claims have been paid.
Claims filed by members are paid from membership fees and are backed by $31 million in assets through a contract Peoples Assurance has with a company called Transport Risk Ltd., Parkin said.
Deputy Dist. Atty. Jane L. Shade said she and the state Department of Insurance think Peoples is writing insurance policies, which requires a state license. Such a license is required to ensure that a company has the financial backing to pay accident claims, Shade said. Papers filed earlier this year by Peoples show that the company has only about $50,000 in assets, she said.
The $31 million in assets that Peoples Assurance says it has backing its policies has never been verified, Shade said, and she has been unable to contact Transport Risk Ltd.