UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): Commission File Number
August 24, 1994 1-8233
USF&G CORPORATION
(Exact Name of Registrant as Specified in Charter)
Maryland 52-1220567
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation)
100 Light Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices)
(410) 547-3000
(Registrant's telephone number, including area code)
USF&G CORPORATION
FORM-8K
______________________
Item 5. Other Events.
Proposition 103. On August 18, 1994, the California Supreme Court
issued its opinion in the litigation relating to the implementation of
Proposition 103 adopted by voters in the State of California in November
1988. Proposition 103 required insurers doing business in California to
rollback most property/casualty premium prices in effect between November
1988 and November 1989 to November 1987 levels, less an additional 20
percent discount, unless an insurer could establish that such rate levels
threatened its solvency. In an earlier decision, the California Supreme
Court ruled that an insurer does not have to face insolvency in order to
qualify for an exemption from the rollback requirements and is entitled to
a "fair and reasonable return."
The California Insurance Department's authority to establish
regulations setting forth a basis for determining what constitutes a "fair
and reasonable return" has been the subject of significant controversy.
Some of the regulations proposed by the California Insurance Department to
determine whether rate rollbacks and premium refunds are required by
insurers were invalidated by the California Office of Administrative Law
("OAL") and a substantial portion of such regulations were voided by a
Superior Court trial judge.
The California Supreme Court has now reversed in substantial part
the findings of the lower court, affirming the California Insurance
Department's authority to establish a broad industry-wide formula for
determining what constitutes a "fair and reasonable return." The Court
also concluded that the OAL lacks jurisdiction to review regulations
adopted by the California Insurance Department relating to implementation
of Proposition 103.
USF&G Corporation (the "Corporation") is in the process of
analyzing the opinion and the current regulations to determine the
expected impact. The litigants in this matter have the right to seek
review by the United States Supreme Court, but have not yet announced
their intention in this regard. It is not clear how the current
regulations adopted by the California Insurance Department will apply to
United States Fidelity and Guaranty Company ("USF&G Company"), the
Corporation's principal subsidiary, and there are many issues which remain
unsettled. The range of liability to USF&G Company could be from less
than $10 million up to approximately $31 million, including interest. The
ultimate outcome of this issue is not expected to have a material adverse
effect on USF&G's results of operations or on financial position since any
such liability is not expected to materially exceed amounts reserved.
USF&G CORPORATION
FORM 8-K
______________________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K to be signed
on its behalf by the undersigned hereunto duly authorized.
USF&G CORPORATION
By: DAN L. HALE
Dan L. Hale
Executive Vice President, Chief
Financial Officer and Principal
Accounting Officer
August 24, 1994
