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State obtaining $38 million from defunct insurer.

Byline: Laura Nelson Staff Writer

Creditors and policyholders of a defunct Glendale insurance company will receive nearly $38 million with the settlement of four lawsuits filed by state regulators, officials said Monday.

The California Department of Insurance said the state should soon receive $37.3 million from Fremont Indemnity Co., a workers' compensation insurer. The money will be distributed to workers who hold compensation claims, as well as other creditors.

"We're very happy to recover this much money," said Scott Pearce, a senior estate trust officer for the department's Conservation and Liquidation Office. "This brings conclusion to a very long legal dispute."

From 2004 to 2008, the office filed four lawsuits against Fremont, which the state liquidated in 2003. One of the suits was filed against its parent company, Fremont Compensation Insurance Group; another targeted seven former executives of Fremont Co., including CEO Louis Rampino.

An estimated $27 million of the settlement money will come from two general creditor claims, officials said. The rest of the money is split between various sources, including control over the equity interest of Fremont Life Insurance, valued at $1.2 million and $5 million, in cash from Fremont's subprime mortgage lender.

The most surprising money source, Pearce said, was Fremont's corporate art collection, including prints by photographer Ansel Adams, which netted $4.1 million at auction.

"The parent company tried to take the prints as its own assets," Pearce said. "But the department was determined to settle this from any possible source and we moved aggressively."

Fremont was one of the largest insurance companies to collapse between 1999 and 2003, when the government stopped mandating prices on workers' compensation insurance and prices sank, forcing many insurers to fold. The company had written more than $800 million in premiums the year it was liquidated.

Insurance Department spokesman Darrel Ng said that although Fremont has been liquidated for six years, policyholders have not been denied compensation. The Insurance Guarantee Association, which covers claims of insolvent companies, has paid Fremont's claims since 2003.

"It's much like the FDIC of the insurance industry, where you pay dues and they'll pay off your claims," Ng said. "No one should have been left holding the bag."

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Publication:Daily News (Los Angeles, CA)
Date:Jun 16, 2009
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