Company Ordered to Stop Selling Auto Liability Coverage : Insurance: The state says Peoples Assurance lacks a license and proper financial backing. The firm is restricted to maintaining existing policies.

A Fullerton company that until December sold automobile liability coverage may not sell new policies or renew old ones until charges brought by the Orange County district attorney’s office are settled, a court referee ruled Tuesday.

Orange County Superior Court Referee Greer H. Stroud issued a preliminary injunction prohibiting Peoples Assurance Cooperative Inc. from doing more than maintaining its existing policies pending further action on allegations that the company is operating illegally.

The district attorney’s office filed charges against the company in December, nine months after the state Department of Insurance ordered the company to close. The state has alleged that Peoples is selling automobile insurance without a license and lacks the financial strength to pay claims.

Motorists who buy liability protection from unregulated insurance companies are at risk because they are not protected by a state fund set up to pay claims if licensed insurance companies fail, said Jane L. Shade, deputy district attorney.

At Tuesday’s hearing, Peoples Assurance President Wilbur Piercy said the company has between $15,000 and $25,000 in a Garden Grove bank. Piercy’s attorney, Gregory L. Parkin, said the company is owed about $230,000 in policy fees, however, and that amount would be adequate to pay future claims by members.

In court documents, the company says its policies are also backed by a foreign insurance company, Transport Risk Ltd., which has $31 million in assets. But Peoples Assurance has been unable to prove that those assets really exist, Shade said. Transport Risk Ltd., based in the Turks and Caicos Islands in the West Indies, is named with Peoples Assurance in the district attorney’s civil action.

Eladio Venero, an Anaheim Hills resident who says he is the only California investor in Transport Risk Ltd., said in court Tuesday that he wants Peoples Assurance to stop operating because the company has failed to pay Transport Risk any money to back the automobile liability policies it writes. Transport Risk is also unlicensed to sell insurance in California, Venero said.

Venero said he invested more than $80,000 in Transport Risk before he learned of its problems.

Piercy said he set up the insurance pool, which now has 1,325 members, as an affordable alternative to regular auto coverage. The state’s insurance regulations seem geared more toward protecting big insurance companies from smaller competition than to protecting the consumer, he said.

Peoples offers members a maximum of $35,000 in automobile liability coverage for a one-time $150 membership fee and a $600 annual charge. The pool approach, Parkin said, allows members to find affordable insurance.

The company argues that it does not fall under the Department of Insurance’s regulations because it is not a regular insurance company. Peoples has never failed to pay a legitimate claim by one of its members, Parkin said.

Stroud, however, in granting the injunction against the company, said, “You’re calling it a cooperative but it sounds like an insurance company to me.”