Pasadena Workers’ Comp Insurer Seized Over Fund Shortage
By DARRELL SATZMAN
In another sign of the state’s troubled workers’ compensation system, failing Pasadena insurer Paula Insurance Co. has been placed under the control of a conservator.
The State Department of Insurance moved to take control of Paula Insurance when its parent company, Paula Financial, in March reported a negative policyholder surplus of more than $22 million at the insurer. In February, Paula Insurance had voluntarily agreed to stop writing new workers’ compensation cases.
Los Angeles Superior Court Judge Robert O’Brien signed the order giving the state control of Paula Insurance on April 26.
“Their resources to pay claims are $22 million short,” said Loren Suter, deputy commissioner of the Department of Insurance. “In the next couple of weeks we will decide whether to move forward with a liquidation order, which is what usually happens in these cases.”
Debbie Maddocks, vice president of investor relations for Paula Financial, said, “We are a complying with the order. Keep in mind, this only effects Paula Insurance, not our other businesses.” It also operates Pan American Underwriters and Pan American Benefit Administrators.
Paula is among more than half a dozen workers’comp carriers to be seized by state regulators since 2000. Insurers have racked up huge losses as medical fees and other costs associated with claims have soared.
State officials said that if necessary, Paula’s policyholders in California will be covered by the insurer of last resort, the State Compensation Insurance Fund.