Oklahoma insurance regulators have moved to seize a workers’ compensation insurer they say is insolvent and whose owners are being accused of deceptive financial transactions involving another recently-liquidated insurer.
The Oklahoma Department of Insurance on March 18 filed a receivership request against Imperial Casualty and Indemnity Insurance Co. in the District Court of Oklahoma County. [Case No. CV-2010-2340]
The court has set an April 9 hearing on the matter. In its order, the court noted that “based on its own actuary’s opinion, Imperial is financially impaired and/or insolvent.”
In the meantime, a court appointed assistant receiver has begun marshalling the assets of Imperial and the company’s bank accounts have been closed.
The court has raised questions about the fitness of the executives of the company. It said that “competence and integrity of the persons controlling Imperial’s operations are such that it would not be in the interest of policyholders or the public to permit the company to continue operations.”
Imperial sells workers’ compensation insurance to Professional Employer Organizations (PEOs). The company claims Oklahoma as its domicile, with its executive offices being in Frisco, Tex. The company’s Web site says it currently provides coverage for more than 5,000 firms and 42,000 workers.
At issue are a number of complex financial transactions that the insurance department says were “orchestrated” to deceive the state and bring about the “downfall” of the Imperial’s parent company, Park Avenue Property and Casualty Insurance Co. (PAPC).
According to the OID, until January 2009, Imperial was a subsidiary of Providence Property and Casualty Insurance Co. Providence was sold on Jan. 29, 2009, to Park Avenue Insurance Co., renamed Park Avenue Property and Casualty Insurance Co. PAPC was controlled by Jerry Lancaster, Derek Lancaster, Deron Lancaster, Aaron Lancaster and Jan Schindler, and was liquidated by the OID in late November 2009.
The department alleges that Jerry Lancaster bought shares in another Oklahoma domestic insurance company, BancInsure Inc., with proceeds from the sale of Providence/PAPC. That transaction was effected through an Imperial affiliate, Eagle Insurance Agency, which is owned by Jerry Lancaster.
Lancaster subsequently arranged to have himself and an associate at Imperial, Terry McCullar, named to BancInsure’s board. Later, according to the department, Eagle Insurance Agency “began issuing workers’ compensation policies under BancInsure’s name in California,” without BancInsure’s knowledge or authorization.
According to the OID, the Providence/PAPC purchase was accomplished via “several complex agreements between Providence, Imperial and several financial institutions.”
Among other things, the department says that the parties had planned to use a $56 million bond portfolio as collateral for a loan to Providence’s future purchaser. Use of the bond portfolio would have required OID approval, which was neither sought nor granted, and “would have instantly made Providence insolvent,” the department alleges.
The Providence/PAPC receivership and investigation are ongoing.
The insurance department also alleges that at least one principal of Indemnity — Jerry Lancaster, vice chairman — withheld information about a federal injunction prohibiting Lancaster from participating in ERISA business due to fiduciary improprieties, in violation of Oklahoma law.
In addition, according to the department, Jerry Lancaster and Indemnity’s Chief Counsel Robert Thomas participated in “a scheme to surreptitiously procure an Oklahoma producer license for Deborah Scott — Mr. Lancaster’s purported mistress — in circumvention Oklahoma law.”
Calls to Derek Lancaster, Jerry Lancaster and Robert Thomas at Imperial Casualty and Indemnity Insurance Co. were not returned before press time.
Pending the Imperial Casualty hearing, Mark D. Tharp was appointed assistant receiver and Andrew D Downing of Rhodes Hieronymus Jones & Tucker as counsel for the receiver.
The Oklahoma Department of Insurance receivership application and the court’s order regarding Indemnity Casualty are available online at: http://www.okaro.org/Community/Company+Records/1850.aspx.
Was this article valuable?
Here are more articles you may enjoy.