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SAN DIEGO-The California Insurance Department has taken control of Golden Eagle Insurance Co., a major California workers compensation insurer that has clashed with regulators in recent months over an allegedly substantial reserve shortfall.
A San Diego County Superior Court judge on Friday granted the Insurance Department authority to seize the insurer along with all of its assets, books and records, the department announced.
"Certain business practices by the management of (Golden Eagle) have put both the company and consumers at risk," Insurance Commissioner Chuck Quackenbush said in a statement. Mr. Quackenbush specifically cited $66 million in unsecured loans he said were taken by Golden Eagle Chairman and owner John Mabee, contributing to a $138.5 million reserve shortfall.
Mr. Quackenbush last year ordered Golden Eagle to boost its reserves by $138.5 million, and the insurer lost a court battle over the insurance department's authority to order the increase (BI, Nov. 25, 1996). Last month, Mr. Mabee said Golden Eagle would comply, filing a plan to boost reserves through a combination of reinsurance and direct additional reserves (BI, Jan. 27).
Instead, the Insurance Department decided to take action: "We obtained evidence that there was substantial manipulation of the data to cover up the $138.5 million shortfall," Mr. Quackenbush said. "In light of this manipulation of data, and Golden Eagle's refusal to provide all of the audited financial statements, the only prudent course of action was to take over the company."
Mr. Mabee could not be reached. Golden Eagle officials declined to comment.