PAULA Financial Declares Special Cash Dividend

PASADENA, Calif.--(Business Wire)--
PAULA Financial (Pink Sheets: PFCO) today announced that the Board
of Directors has declared a special cash dividend in the amount of
$1.52 per common share. The distribution will be paid to holders of
record as of September 3, 2008 and will be paid on September 15, 2008.

The Board intends to post financial and other updates from time to
time on the Company's website, www.pfco.cc. The Company's remaining
cash reserves shall be held largely as reserves for potential
indemnification commitments as well as to provide for contingent and
unknown claims, including tax. The current special dividend of $1.52
combined with the $3.89 dividend of March 2008 total $5.41 to date,
and represent almost 80% of proceeds from the sale of assets completed
in February 2008. Future cash distributions to PFCO stockholders, if
any, have not been determined by the Board at this time.

The Company cautions readers to recognize the existence of certain
forward-looking statements in this press release and in any other
statement made by, or on behalf of, the Company. The Company disclaims
any obligation to update forward-looking information. Determining tax
consequences can be complicated. Eligible stockholders should consult
their own tax advisor. The state tax treatment for this distribution
may vary from the federal and may vary from state to state.
Stockholders are strongly advised to consult their own tax advisors
for the appropriate tax treatment in their state of residency.

PAULA Financial
Investor Relations, (626) 844-7500

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