Insurer’s Woes Could Force City to Pay Part of Award

Continuing revelations about the financial problems of the city’s insurance company are causing growing concern among Torrance officials that the city may end up paying a large portion of the $6-million civil judgment against the Torrance Police Department.

The company, Protective National Inc. of Omaha, has been under Nebraska state supervision for three years, a status that allows the insurer to continue paying claims but bans the company from taking on any new business.

On Friday, Nebraska insurance regulators announced that they are also placing Protective National’s parent company, Central National Insurance Co. of Omaha, under state supervision.

Although Protective National has continued to pay claims during its three years under supervision, the state action is the last step before liquidation and is a sign of serious financial trouble, said Dan Quine, assistant chief examiner for the Nebraska Department of Insurance.

‘Everybody in the Chain . . . a Little Weak’

Torrance City Atty. Kenneth Nelson said he was also startled to learn Friday that the California Insurance Guarantee Assn., which he believed would cover the city’s loss in the event Protective National did not, would pay only $500,000.

“Everybody in the chain here is getting a little weak,” Nelson said. “It’s a matter of some concern.”

Because insurance companies often sell a certain amount of their risk on major policies to other insurance carriers, called reinsurers, Nelson on Friday filed a formal request for information about other companies that may be responsible for paying the Rastello judgment.

Quine said financially weak reinsurers triggered Protective National’s slide into financial straits three years ago.

Torrance attorney Arthur Karma, who is acting as a spokesman for Protective National, acknowledged that the bulk of the Torrance policy is carried by reinsurers, possibly as much as 75%.

“The city and the insurance company are working together . . . to resolve the problem within our capabilities,” Karma said. “We’ve done a very good job of staying in supervision and honoring our debts and taking care of our policyholders.”