State Orders Halt to Sale of Company’s Policies : Insurance: Official rejects contention that NAFTA allows Uruguayan firm to operate without a license.

In a confrontation over the North American Free Trade Agreement, state Insurance Commissioner Chuck Quackenbush rejected a Uruguayan company’s claim Tuesday that NAFTA preempts state law and ordered that a Santa Ana agent stop selling the company’s policies here.

Quackenbush, in a cease-and-desist order, alleged that Azteca Insurances S.A. in Montevideo, Uruguay, was selling policies without a license. He ordered the company’s agent, William C. Neel, to stop selling Azteca policies.

“It’s the first time we’ve seen anybody use NAFTA as an excuse in California,” said Jose Aguilar, a state Insurance Department lawyer in San Francisco who is heading the investigation.

Aguilar said a company representative had argued that Azteca’s relationship with a Canadian company should exempt it from California requirements under NAFTA. “They’re just using certain buzzwords to confuse and misrepresent,” the lawyer said.

Neel said he hadn’t sold policies for the Uruguayan company, but had referred client companies to it, along with other carriers, as a “risk management consultant.” Neel, who learned about the order when reporters called him, said he couldn’t discuss the merits until he had read the order.

The number and the value of the policies that Azteca and Neel allegedly sold have not been determined, Aguilar said. Some were purchased by businesses in Carson and Gardena, he said, but he would not name them.

The agency said Azteca sold workers’ compensation, health and employer liability insurance through various agencies in which Neel was involved, including Employers Cost Management Services in Mission Viejo, Cost Solutions International in Lake Forest, American Industries Management Inc. in Las Vegas and Winmill International Inc. in Manitoba.

The state agency received several complaints about Azteca’s claims from other insurance agents and attempted to contact Azteca in Uruguay. The department could only find an Azteca representative in Ireland, however, who said he did not represent the company as a whole.

“If we have this kind of problem, how’s a consumer supposed to have any accountability?” Aguilar said.

A hearing on the order against Azteca and Neel has been set for April 11 before an administrative law judge in Los Angeles.

Quackenbush, in a prepared statement, said Azteca’s use of the federal trade agreement was similar to a case brought last year against another Orange County insurance agent, Larry Kenemore, who sought protection under a federal law.

Kenemore claimed to be exempt from state workers’ compensation laws under the Employees Retirement Income Security Act. But the agency’s cease-and-desist order filed against him and his company, the Assn. of Trust and Guarantee, was upheld by a judge last October.

Kenemore also ran the National Employees Trade Assn. as well as Bestland Insurance Agency in Los Angeles, which was closed by the state agency last year for the unauthorized sale of workers’ compensation insurance. A subsequent investigation showed that Bestland’s customers were being rolled over into Kenemore’s other operations, the agency said.