TO THE COURT AND TO ALL INTERESTED PARTIES AND THEIR ATTORNEYS OF RECORD:

The Report and Account of Ancillary Conservator from August 29, 1994 to April 30, 2004, and application for Order (1) Settling and Approving Final Report and Account of Ancillary Conservator and Liquidator from August 29, 1994 to April 30, 2004; (2) Authorizing the Applicant as Ancillary Liquidator to decline to continue this insolvency proceeding; to

PLEASE TAKE NOTICE that the Insurance Commissioner of the State of California in his capacity as the Liquidator ("Liquidator") of Western Star Insurance Company, Ltd. ("Western Star") submits the following Final Report and Account of Conservator and Liquidator from August 29, 1994, to April 30, 2004.

PLEASE ALSO TAKE NOTICE that on September 29, 2004, at 9:30 a.m. or as soon thereafter as the matter may be heard in Department 86 of the above-entitled Court, located at 111 North Hill Street, Los Angeles, California, the Liquidator will apply and hereby does apply for an Order (1) settling and approving report and account, (2) authorizing ancillary liquidator to forego claims and notice procedures; (3) releasing the commissioner from liability; and (4) terminating proceedings and discharging conservator and liquidator.

The application is based on this Notice of Application and Application, the attached Declaration of Mohsen Sultan , all pleadings, records, exhibits and papers on file in this action, and such other evidence and argument as may be presented prior to or at the hearing on the motion.

In support of the application, the Liquidator states the following:

BACKGROUND

The Florida Liquidation

1. Applicant is the duly elected Insurance Commissioner of the State of California.
2. Respondent Western Star is a corporation organized under the laws of Antigua that, without any certificate of authority from the State of Florida or the State of California, transacted the business of insurance from the State of Florida in the State of California, including the sale of insurance policies to, and the collection of insurance premium payments from, insurance consumers in this State.
3. On June 14, 1994, by an order to which Western Star consented, the Insurance Commissioner of the State of Florida ("Florida Commissioner") was adjudged Domiciliary Receiver for purposes of liquidation of Western Star ("Domiciliary Liquidator") in the Florida case entitled State of Florida, ex rel. the Department of Insurance of the State of Florida v. Western Star Insurance Company, etc. (Second Judicial Circuit, Leon County No. 94-2188).

The California Liquidation

4. On August 19, 1994, as Domiciliary Liquidator, the Florida Commissioner consented to the California Commissioner's request and stipulated to an order appointing the California Commissioner as Ancillary Receiver and Liquidator of Western Star in this State.
5. On August 29, 1994, the California Commissioner was appointed Ancillary Receiver/Liquidator of Western Star in the above-entitled action.

The Florida Litigation

6. On December 8, 1994, the Florida Department of Insurance demanded over $5.4 million from J.P. Morgan Chase, the successor-in-interest to the trustee of Western Star's NAIC Trust for Alien Surplus Lines Insurers.¹ At the request of the Florida Department of Insurance, the California Insurance Commissioner, as Ancillary Liquidator, kept open the Western Star estate to assist in the litigation against Western Star's trustee's successor-in-interest.
7. Over the next ten years, intense and protracted litigation ensued, ending on April 29, 2004, with the Agreed Final Judgment Approving Settlement Agreement and Resolving All Claims ("Settlement").² A copy of the Settlement is attached as Exhibit B to the Mohsen Sultan Declaration.
8. The Settlement provided, inter alia, that Chase would ". . . cause the sum of $5.5 million to be paid to the Receiver within 35 days after the entry of [the Settlement]."

Pursuant to a prior agreement with the Domiciliary Receiver, the administrative expenses for this ancillary proceeding will be paid from the proceeds of the Settlement. However, other than such reimbursement, the California Ancillary Liquidator does not, and will not, have significant assets.

The Interpleader Action

9. On December 2, 1994, plaintiff-in-interpleader First Los Angeles Bank ("FLAB") was granted leave to intervene herein as interpleader and to deposit the principal amount of $53,614.39 ("principal amount") with the Clerk of this Court.
10. On December 13, 1996, FLAB deposited said principal amount herein and was discharged from any further obligations in this action.
11. On January 8, 1996, Applicant was authorized to settle the interpleader action, and on February 22, 1996, this Court entered its judgment Pursuant to Stipulation for distribution of the principal amount as follows:
    1. $18,614.39 plus 33 and 1/3 percent of the accrued interest to Applicant;
    2. $35,000.00 plus 66 and 2/3 percent of the accrued interest to Riding Insurance Services.

Florida's Claims Process

12. The Domiciliary Receiver has received court approval to establish a claims bar date of March 31, 2005. The Domiciliary Receiver is in the process of determining the best manner in which to notify California claimants of the claims bar date and the claims process. Among the considerations is publication notice in California newspapers of general circulation. At this time, the Domiciliary Receiver estimates there are fewer than 2,000 (two thousand) California claimants.

California's Claim Process - Insufficient Assets to Complete Claims Procedure

13. With the Chase case settled, Florida no longer has a need for the California Liquidator's assistance. Furthermore, without funds from the Florida liquidator which are no longer anticipated, Applicant possesses insufficient assets to administer a claims procedure or otherwise administer the estate. Applicant has therefore concluded that he should not be required to follow the claim procedure set forth in Insurance Code §§ 1021-1033.

Account

14. of April 30, 2004, the assets of this estate was negative ($52,228);
15. Applicant's estimated administrative budget is attached hereto as Exhibit C to the Mohsen Sultan Declaration and incorporated by reference:

WHEREFORE, Applicant prays that this Honorable Court issue its Order:

1. Approving the Report and Account;
2. Authorizing the Applicant as Ancillary Liquidator to decline to continue this insolvency proceeding; to decline to publish notice of its termination because the Domiciliary Receiver will be responsible for informing California claimants of the claims procedure; to waive the requirement that the Applicant proceed in accordance with the claim procedure set forth in Insurance Code sections 1021, et seq.; and absolving the Insurance Commissioner from any liability that might be incurred thereby; and
3. Terminating and dismissing this proceeding;
4. Granting such other and further relief as the Court deems just and proper.

MEMORANDUM OF POINTS AND AUTHORITIES
PRELIMINARY STATEMENT

This is an application by the Insurance Commissioner of the State of California as Ancillary Liquidator ("Applicant") of Western Star Insurance Company, Ltd. ("Western Star") for an order of this Honorable Court to forego the procedure to publish notice and administer claims against the assets of the liquidation estate.

On June 1, 1993, Applicant summarily seized and took possession of Western Star (Ins. Code § 1013). On June 2, 1993, Applicant filed his application with this Court for an order appointing him as Conservator of Western Star (Ins. Code § 1015) whereupon this Court appointed Applicant as Conservator of Western Star.

On June 14, 1994, by consent order entered in the Florida case entitled State of Florida, ex rel the Department of Insurance of the State of Florida v. Western Star Insurance Company, etc. (Second Judicial Court, Leon County), the Department of Insurance of the State of Florida was ordered and adjudged Receiver for the purposes of Liquidation of Western Star Insurance Company.

The Uniform Insurers Rehabilitation Act has been adopted in the State of California (Ins. Code §§ 1064.1, et seq.) and the State of Florida. (West's F.S.A. §§631.011, 631.031, 631.091, 631.141 to 631.201.)

On June 14, 1994, the Insurance Commissioner of the State of Florida as Domiciliary Receiver of Western Star stipulated that an order appointing Applicant as Ancillary Receiver of Western Star could be entered by this Court.

The Domiciliary Receiver has completed its litigation to recover $5.4 million from the successor-in-interest of Western Star's trustee. Therefore, there is no reason to keep the ancillary proceeding open any longer.

As Ancillary Liquidator, Applicant has determined that Western Star has insufficient assets to complete a procedure to publish notice and administer claims against this estate. (Ins. Code §§ 1021-1033).

Consequently, Applicant presents the instant application.

Insurance Code § 1021(a) requires the Insurance Commissioner as Liquidator to publish notice requiring the filing of claims against the assets of the estate. Insurance Code §§ 1022-1033 set forth the statutory procedure for the handling of such claims.

Applicant, as public officer (Ins. Code § 1059) has determined that Western Star has insufficient assets to complete these notices and claims procedures and that requiring him to do so would be a waste of the assets of this estate. Applicant's determination is entitled to the presumption of regularity (Evid. Code § 664).

Insurance Code § 1021(c) also provides that when the Commissioner determines that the estate lacks sufficient assets to permit significant distribution, he may, after providing notice, (1) decline to handle claims or (2) decline to continue the insolvency proceeding and may abandon it.

Applicant, as public officer (Ins. Code § 1059) and as the court-appointed Ancillary Liquidator of Western Star has determined that Western Star lacks sufficient assets to permit significant distribution either to persons interested in the assets of this estate or to pay the expenses of administering this estate. Applicant's determination is entitled to the presumption of regularity (Evid. Code § 664). Further, Applicant has no assets and has incurred over $52,000 in costs for which he will not be reimbursed. Therefore, Applicant cannot pay his expenses and cannot distribute fees.

CONCLUSION

For all the foregoing reasons, Applicant Insurance Commissioner of the State of California respectfully requests that this Honorable Court issue its order authorizing Applicant to forego the statutory procedure (Ins. Code § 1021) to notify and pay potential claimants to the assets of Western Star.