CompSource Mutual is an insurance company writing worker's compensation premiums for Oklahoma businesses. Last year, it became the center of heated litigation when a group of its policyholders sued the company, hoping to halt its plan to reorganize into a stock structure.
According to court records, TrivestCo Energy and several other Oklahoma businesses allege CompSource's plan to reorganize from a mutual ownership structure (with a fiduciary responsibility to benefit its policyholders) to that of a stock structure (primed to pay shareholders), violates the company's statutory mandate to operate in their interests.
The reorganization would allow CompSource to use about $1 billion of surplus monies accrued over the last decade to diversify what kind of insurance it can write and what states it can write it in. Critics in court say that surplus should be used to pay existing policyholders with dividends and lower premiums for their share in the ownership, not to dilute the ownership and enrich the company.
And as part of the latest effort to halt the plan, plaintiff lawyers point to private 2024 text messages between Oklahoma Insurance Commissioner Glen Mulready and Tulsa Republican Rep. T.J. Marti to allege the commissioner "advocated" for a law that year to clear the way for CompSource's reorganization, before policyholders knew about it — and despite his role as an independent regulator.
House Bill 3090, by Rep. Mark Tedford, another Tulsa Republican, is the measure in question.
Signed into law by Gov. Kevin Stitt in 2024, the law outlined the process by which a mutual insurance company could convert to a stock company, and crucially for the plaintiffs' argument, rested the regulatory authority to determine whether it's in the best interest of policyholders in the hands of the sitting insurance commissioner.
Mulready denied allegations of advocacy on behalf of CompSource during an interview with KOSU, saying he did his due diligence to ensure his regulatory independence. He also said his decision is not final, as CompSource's policy holders have yet to cast their final vote to approve the plan themselves.
"It's quite a stretch to say that I was advocating for it, " he said.
The texts, dated Feb. 6, 2024, show Rep. Marti, who sits on the House Insurance Committee, asked Mulready whether HB 3090 was borne of a request.
"Is 3090 a requested bill?" Marti asks. "Is this an issue or a one off company trying to change from a mutual to stock?"
"This is not our bill but is a Tedford bill," Mulready replies. "I did some checking and I understand it's a request from CompSource. This would allow them to raise $$ to expand into other lines of business."
"TY for the heads up," Marti said back.
"I'm sure you're aware, but currently they write Workers Comp ONLY," Mulready continues. "They've been talking for a while now about expanding their offerings."
During the legislative session, Mulready said, it's common for lawmakers to prod him for more information.
"If it has anything to do with insurance," He said, "They might be calling me to say, is this your bill? You guys moving this or who's behind this?"
Mulready said the texts clearly indicate that was the first time he heard Compsource was planning to reorganize.
"I knew it was the Tedford bill; I did not know who was behind it," he said. "I had to go find out from my team, my legislative team, and that's when I learned CompSource was the one pushing that."
Rep. Marti did not agree to an interview about his correspondence with Mulready, but did respond to the initial inquiry. Tedford's office did not reply to inquiries.
"It's a non-story," Marti said in a text to KOSU. "Legislators often reach out to agency personnel, lobbyists, associations, or other members to figure out who is behind legislation and what their agenda is. It was simple due diligence, and the commissioner answered my questions."
But Hannah Whitten, an attorney representing TrivestCo, Lobaugh Law Firm and other businesses with CompSource policies, said it's not that Marti texted Mulready for more information that stands out, it's the timing of the messages and what they say.
"Before a single policyholder that owns CompSource knows that CompSource is spending money to change the law and before they know that comp source is intending to transition pursuant to this lobbying effort that they are working on, the commissioner is fully aware that this is an effort by CompSource," Whitten said. "You can see in the text messages … he specifically states that this bill would allow them to raise 'dollar-sign, dollar-sign' to expand into other lines of business. And that's advocacy."
The exchange between Mulready and Marti raises questions about the commissioner's regulatory neutrality, Whitten said.
"Who is supposed to look out for the policyholders of this state?" she said, "Why is the insurance commissioner privately advocating for legislation that would help CompSource raise additional capital? What other private conversations took place?"
Mulready said there are no other recent communications between him and lawmakers or executives at CompSource.
"I have had conversations with their previous CEO in the past about their goal of expanding their product offerings; That's it," he said. "It was not about a reorganization or anything tied to this."
He said in the insurance world, such conversations between company executives and state officials are a regular occurrence.
"It would make sense for really most any company to look to diversify their products," Mulready said. "I mean me and the insurance department have those conversations with insurance companies every day. They may be looking to go into this type of space or get out of that type of space."
The laws laid out in HB 3090, he said, apply to any mutual insurance company hoping to reorganize into a stock structure, not just CompSource.
"That would be tossed in a heartbeat," Mulready said.
The history, the courts and the stakes
Whitten isn't satisfied.
Getting to the bottom of the commissioner's role in CompSource's plan, she said, matters because the company began as the State Insurance Fund, or SIF, when lawmakers started it as an agency in 1933 with $20,000 in taxpayer money. Since then, all the capital related to the company has been safeguarded by the state courts for the benefit of policyholders.
Michael Clingman, who served as the SIF Commissioner in the 1990s and Gov. Brad Henry's State Director of Finance in 2009 and 2010, is now an expert witness on behalf of Whitten and the plaintiffs. He said the idea behind the SIF was initially to provide an insurer of last resort for businesses unable to afford private workers' compensation premiums due to their high risk.
"If private insurance companies wanted to write to you, they would write to you," Clingman said. "They didn't want you. Then you'd go to the state fund. But it began to grow really fast and the state saw a bunch of money there and said, 'we'll just take this money away since we started this thing.' The Supreme Court said, no."
In the 1975 case Moran v. State ex rel., the Oklahoma Supreme Court established that all capital associated with the company is held in trust of the policyowners, rather than the state.
The 1970s is also when the SIF formally became a state-owned mutual insurance company amidst changing federal regulations. It remained so until 2013, when lawmakers, including then-State Representative Mulready, ran House Bill 2201 privatizing the SIF into CompSource Mutual Insurance Company.
In 2014, another case, Tulsa Stockyards v. Clark, went before the State Supreme Court and the bench reaffirmed its position that CompSource's capital belonged to its policyholders by virtue of their mutual ownership.
HB 3090, the bill Mulready is accused of advocating for, came a decade after the Tulsa Stockyards ruling. Whitten said the reason it's problematic is that it creates a new type of insurance company with competing incentives.
"Before 2024, there were only two types of insurance companies under Oklahoma law: a stock insurance company and a mutual insurance company," she said. "And they operate very differently."
A mutual insurance company is owned by its policyholders, so the goal is to keep rates low and provide the best coverage possible, she said. A stock insurance company focuses on maximizing profits, which translates to raising rates, regardless of quality coverage.
By way of the 2024 legislation, CompSource would be creating a blended version of the two, Whitten said.
"It creates an insurance company that has both policyholders and stockholders, and it is an inherent conflict of interest," she said. "Why? Because the same board that serves the policyholders that want increased coverage and lowered rates also serves the stockholders who want to maximize profits."
The details of the plan matter, she says.
"CompSource's plan has no restrictions for the board to gift itself stocks and shares at the expense of the policyholders," she said. "But here's something even more disgusting: This is the first plan in United States history where the insurance department approving that plan does not have a requirement that the commissioner's office cannot gift itself stock if this plan goes forward tomorrow."
Mulready said he has no such plans, nor any future aspirations to work for CompSource.
"I will probably go into more of a consulting role in the regulatory space," he said. "Exactly what that will look like, I don't know. You can quote me that I will not land in any capacity with CompSource. It's not on the agenda."
He points to his hiring of the third-party firm Examination Resources, LLC, to independently review CompSource's plan alongside his office as proof of his transparency. And the extra stipulations he added to make the reorganization fairer for policyholders.
"It wasn't just a carte blanche approval," he said. "We required…that they have 300% risk-based capital for three years. We have to pre-approve any dividends issued by them for the first three years. We are required to receive advance notice of any director or officer changes. And we have to approve any stock distribution or sale for five years with an independent evaluation. And it prohibits stock or stock option grants to officers or management for the first five years as well."
The litigation is ongoing in Oklahoma County District Court, and has been formally petitioned to escalate to a class action. The Court can decide that Mulready's approval of the CompSource plan is too fishy and outside of the statutory timeline, as plaintiffs argue, or lift the pause on the plan and let policyholders make the final decision.
For the commissioner's part, he said he's a little confused about what damages plaintiffs are claiming, considering the plan hasn't been approved by a two-thirds majority of policyholders – the last step before it can be implemented.
"The policyholders are in control; They choose their own destiny," he said. "Our review process is to assess that and make sure that the policyholders are protected."
