Decision announced Monday means company cannot sell policies in California

By Jeff McDonald, SAN DIEGO UNION-TRIBUNE

October 21, 2019

https://www.sandiegouniontribune.com/news/watchdog/story/2019-10-21/sta…

The California Department of Insurance announced Monday it has denied an application to approve the sale of an insurance company whose executives previously donated tens of thousands of dollars to Commissioner Ricardo Lara.

The rejection means the California Insurance Co., which is a subsidiary of Applied Underwriters, cannot sell insurance in California — for now at least. Applied Underwriters is at the center of a political scandal involving the elected state insurance commissioner.

California Insurance last week incorporated in New Mexico, after California regulators delayed approving an application to transfer ownership.

California regulators “had been in the process for several months of extensively reviewing the application for sale of the company when applicants abruptly changed plans and failed to seek the required prior approval,” the department said in a statement.

“In addition ... the competence, experience and integrity of the persons who would control California Insurance Co. after the change of control is not in the best interest of its policyholders or the public,” the department said.

Michael Soller, a department spokesman, declined to discuss the decision beyond the prepared statement while the department is “exploring additional enforcement remedies.”

A spokesman for Applied Underwriters did not immediately respond Monday to requests for comment.

The announcement appears to be a significant setback for Steven Menzies, a Northern California insurance executive of Applied Underwriters.

Menzies met with Lara at least twice before filing an application for approval to transfer company ownership on May 30. Also his associates had donated more than $46,000 to Lara’s 2022 re-election campaign.

Before his election last year, Lara promised voters he would not accept campaign contributions from insurers, to avoid conflicts of interest. In July he returned $83,000 in donations from insurers after The San Diego Union-Tribune reported on the contributions.

Lara also pledged to recuse himself from any decisions involving Applied Underwriters.

His senior deputy intervened in department proceedings at least five times to the benefit of the company.