By Luke, Robert
American Banker , Vol. 150
LOS ANGELES -- Two California businessmen have filed suit against Cal-Farm Insurance Co. and others for $450 million, charging fraud, breach of contract, and racketeering.
The insurance company earlier had filed suit against the businessmen -- Errol and John Coughlan, owners of Eagle Bonds and Insurance Brokers Inc. and California-Pacific Construction Inc. -- alleging fraud and racketeering, among other things.
Cal-Farm, affiliated with the California Farm Bureau Federation, has been involved in a scandal concerning mortgage guarantees that has tarnished banks and savings and loans across the country, including the Bank of America, which apparently was not involved with Cal-Farm or Eagle Bonds.
Cal-Farm recently was declared insolvent by California insurance regulators, and its life insurance and property/casualty businesses were sold to Zenith National Insurance Corp., Encino, Calif. Not included in the sale were Cal-Farm's surety and financial guarantee businesses.
Zenith subsequently formed a subsidiary, Cal-Farm Insurance Co., to operate the newly acquired businesses. The Zenith subsidiary is not involved in the suit filed by the Coughlans in U.S. District Court here. Their suit is against the old company. …