Fremont Indemnity Company
Estate Manager: Scott Pearce
Email Address: PearceS@caclo.org
Telephone Number: (415) 676-5013
Seizure Date: 06/04/2003
Conservation Date: 06/04/2003
Liquidation Date: 07/02/2003
POC Final Filing Date: 06/30/2004
Website: http://www.caclo.org/fremont
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June 4, 2003, Sacramento - In a clear indication of the enormous problems plaguing California's workers' compensation system, Insurance Commissioner John Garamendi obtained a conservation order Wednesday over insolvent insurer Fremont Indemnity Company, putting it under the operational control of the California Department of Insurance (CDI).

"Another workers' comp company bites the dust," said Garamendi. "This is an unmistakable signal that California's workers' comp system is collapsing. I see more of the same in our future unless we enact immediate, substantial legislative reform to address the out-of-control costs in the system."

Garamendi pointed to factors such as skyrocketing medical costs, unnecessary and costly litigation, system inefficiencies and fraud as major reasons for the failure of at least 25 workers' comp insurers like Fremont Indemnity in the past few years. These escalating costs have increased the expense of covering claims for insurers and sent premiums paid by employers soaring.

Despite the fact that it had not written a significant amount of business since 2000, Fremont Indemnity, based on its own actuarial analysis, was required to increase its loss reserves by approximately $300 million in 2002 to cover the increasing loss costs of its business. This sapped its policyholders' surplus, dropping it to negative $290,609,734 and making it insolvent under California law.

Garamendi's Wednesday conservation action will not disrupt employers or policyholders who were covered by Fremont Indemnity. During 2002, CDI facilitated a transfer of Fremont Indemnity's $105 million book of employers workers' compensation business to an unrelated firm called Fremont Employers Insurance Company. Fremont Employers is not affected by the conservation of Fremont Indemnity.

CDI's Conservation & Liquidation Office has taken over the operations of Fremont Indemnity and will oversee management of the company. Its remaining insurance policies will expire this month and all workers' compensation claims will continue to be paid in full and on time during conservation.

Garamendi petitioned the Los Angeles County Superior Court to set a hearing date within the next 30 days to appoint him as liquidator. If the Court agrees, the California Insurance Guarantee Association will become responsible for paying Fremont Indemnity's direct California unpaid claims, which are currently estimated at $1 billion.

Glendale-based Fremont Indemnity is owned by the Fremont Compensation Insurance Group, which is a subsidiary of Fremont General Corporation. Policyholder questions about coverage should be directed to the CDI Hotline at (800) 927-HELP (4357).

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