insurance firm is based in Bermuda will take place later this month.

Health insurer Dual-Plus is currently in "conservatorship'', which is the Californian equivalent of receivership, and is being managed by the state's Department of Insurance.

Dual-Plus has a captive firm in Bermuda run by Jardine Pinehurst Management.

California Insurance Commissioner Mr. John Garamendi took over the running of Dual-Plus last month.

He claims Dual-Plus unlawfully transacted business in the state by not having a Certificate of Authority or licence to operate.

In addition, Mr. Garamendi said Dual-Plus fell "well below'' the required capital and surplus necessary to be considered to be a "financially healthy surplus lines carrier which is able to pay all policyholder claims.'' Last month, Mr. Garamendi said: "I'm giving Dual-Plus a big minus for putting policyholders and creditors at risk for simultaneously trying to reap the benefits of being based in the unregulated waters of Bermuda while, at the same time, illegally conducting business in the state without qualifying for a California licence.'' In Bermuda, Mr. Garamendi's comments have caused confusion because the company is not, in fact, based in Bermuda, but is headquartered in Long Island, California.

The Bermuda authorities have also taken exception to Mr. Garamendi describing the Island as "unregulated''.

On Friday, though, Mr. Garamendi's office, which asked if Kingston was the capital of Bermuda, tried to play down this description of the Island.

"We did not mean that Bermuda is unregulated but that it is not regulated from California,'' said a spokesman.

He added: "Given the problems we've discovered with Dual-Plus, we believe Los Angeles Superior Court Judge Robert O'Brien will allow us to continue our management of the firm.

"We will also ask the court for a liquidation of the company.'' Dual-Plus has vowed to fight Mr. Garamendi.

A press release by the firm called his action "groundless'' and said it caused great harm to the company's insureds.

"The Department's own spokesperson has stated that this action was not taken in response to any consumer complaints,'' said spokesman Mr. Christopher Noble. "Dual-Plus has always paid all legitimate claims.

"By the Department's own admission, its concern over the financial state of Dual-Plus arises from `assumptions' made from unaudited financial statements.

"The fact that usually protective reinsurance agreements exist between Dual-Plus and Lloyd's of London, which substantially augments Dual-Plus' risk capacity and financial stability, have been totally ignored in the department's `financial assumptions'.

"The Department asserts that the policies filed by our surplus lines broker are technically improper.

"The Department neglects to mention that our policies have been filed in exactly this fashion for over six years, along with detailed filing reports documenting premium volume, paid claims, claims loss ratios and reserve need calculations. All reports document the names of the policies' writing agents.

"The Department has never found any deficiency or criticism in any of these reports.

"What the Department has found, though, is the good business sense to accept the premium taxes and other fees which Dual-Plus pays monthly. Over the last 12 months, these amount to $170,000.'' An assertion by the California Department of Insurance that Dual-Plus sells directly to the public was inaccurate, said Mr. Noble.

He added: "The `conservatorship' Dual-Plus has been placed in is neither conserving nor protecting our insureds in any way whatsoever.

"The actions taken by the Department have, instead, been extremely destructive to Dual-Plus and its insureds, many of which find it impossible to find coverage elsewhere.

"These people are being denied Dual-Plus renewal coverage by the Department.

Funds designated to cover claims cheques already issued have been frozen.

"Medical procedures already authorised for our insureds have been cancelled.

Several of the insureds have received this news while lying in a hospital bed.'' Mr. Noble said the Department of Insurance's action, contrary to protecting policyholders, seems "specifically designed to sacrifice Dual-Plus and the coverage of our members in the name of an alleged regulatory technicality and financial regulations which the Department has, for several years, not deemed to be improper.

"It would seem that, with spiralling health care costs, increasing unemployment and mounting numbers of uninsured families, the Department is adding to the problem instead of helping to solve it''.

Mr. Noble said that Dual-Plus would fight the court action all the way. "We can only hope that the Department will not have succeeded in destroying Dual-Plus, its employees and their families and, most important of all, the policyholders, before we have our day in court.''