Legion & Villanova Insurance Companies (Pa.)

Task Force Appointed for Legion Companies

In the April 12 NOLHGA Wire, it was reported that on March 28 the Commonwealth Court of Pennsylvania placed Legion Insurance Company and Villanova Insurance Company into rehabilitation in response to petitions presented to the court by Pennsylvania Insurance Commissioner M. Diane Koken. Both companies are domiciled in Pennsylvania.

On April 23, guaranty association representatives, consultants, and NOLHGA staff were updated by representatives of the Pennsylvania Department of Insurance on the current status of the rehabilitation proceedings. The representatives indicated that all A&H claims are being processed and paid in a timely manner. The project manager, consultants, and NOLHGA staff are gathering and reviewing information on both Legion and Villanova in the event that the companies become insolvent.

MPC Chair William Falck announced that he has named Peter Leonard (Calif.) as the chair of the Legion & Villanova Task Force. The task force will also include Joe Horvath (Pa.), Dotty Carley (Ala.), William Falck (Fla.), Bart Boles (Tex.), Mike Marchman (Ga.), and Rusty Haydel (Miss.). Paul Peterson and Larry Henry will serve as the NOLHGA staff contacts. Frank O'Loughlin of Rothgerber, Johnson & Lyons LLP will serve as legal consultant to the task force; Tim Lee of Milliman USA will serve as the actuary; and Rob Schimek and Ed Bair of Deloitte & Touche LLP will serve as financial consultants. Fred Buck will serve as project manager.

Task Force Chair - Peter Leonard;   Staff Contact - Paul Peterson AMS Life Insurance Company (Ariz.)

Receiver To Make Partial Distribution

An article in the April 12 issue of the NOLHGA Wire reported that the receiver for AMS Life was recently awarded $1.5 million in interest, costs, and sanctions, to be added to the $17.5 million judgment previously obtained in connection with an action against certain of the former accountants and actuaries of AMS Life. The defendants in that action have filed an appeal with respect to that judgment, and it is anticipated that proceedings on appeal could take a year or more to complete.

In the meantime, the receiver has agreed to make a partial distribution to the guaranty associations from available estate assets. Specifically, the receiver has proposed a distribution of $6,000,137, which, when paid, would increase total distributions to date to just under $66 million (approximately 65 percent of the total guaranty association claims against the estate). A petition for approval of the proposed distribution was filed on April 18, and a hearing is scheduled for May 7.

Task Force Chair - Luther Hill;   Staff Contact - Joni Forsythe Executive Life Insurance Company (Calif.)

11th Installment Billing Reduced

This week, Aurora/Swiss Re agreed to a credit to the participating guaranty associations (PGAs) of approximately $300,000 against the 11th Installment Bill. This resolves a true-up matter identified and reported to the PGAs by Arthur Andersen following its review of the bill. On April 25, NOLHGA distributed a revised bill prepared by Arthur Andersen that reflects each PGA's share of the offset and the new amount due by April 30. This figure will be subject to further true-up in the 12th Installment Bill. PGAs that have already paid the amount in the original 11th Installment Bill will have their true-up credited on the 12th Installment Bill with interest.

Task Force Chair - Art Dummer;   Staff Contact -

Deadline for MPC Meeting Hotel Reservations Nears

The cut-off date for hotel reservation for the next MPC meeting, which will be held May 20-22 at the Hilton Columbus in Columbus, Ohio, is Monday, April 29. Members planning to attend the meeting are encouraged to book their rooms before the cut-off date and to mention the Group Code "NOL" to ensure the NOLHGA room rate of $159 a night.

Members planning to attend the May MPC meeting are also encouraged to register on-line at the meeting Web page. A preliminary meeting schedule and general session agenda for the meeting are available on the site (in PDF format), as is general meeting information. Minor changes are being made to the meeting schedule and agenda, and revised schedules will be posted on the site shortly. Status reports and other meeting materials should be available on the site in early May.

If you have any trouble accessing the MPC meeting Web page, please contact Bryan Owen at [email protected] or 703.787.4112. If you have any questions about the meeting, contact Karen Early at [email protected] or 703.787.4101.

  Staff Contact - Sean McKenna

NOLHGA Provides Amicus Support in Federal Preemption Case

NOLHGA has filed an amicus brief with the First Circuit Court of Appeals in litigation involving the receiver for American Mutual Liability Insurance Company (AMLICO). The litigation arose as a result of the federal government's challenge of the Massachusetts liquidation priority statute and the time limitations established under state law for filing claims against insolvent insurers. More specifically, the government challenged the policyholder-level treatment afforded insurance guaranty associations, arguing that the state liquidation priority statute is preempted by federal law to the extent it provides for payment of guaranty association claims ahead of claims of the federal government. The government also argued that it is not bound by the state's statutory bar date for filing claims against the insolvent insurer's estate.

NOLHGA and several of the affected property and casualty guaranty funds filed amicus briefs with the federal district court in support of the receiver's position on both issues. In a September 27, 2001, decision, the district court held that the provision affording priority to guaranty association claims under the Massachusetts statute is a provision enacted for the purpose of regulating the business of insurance and is therefore shielded from federal preemption in accordance with the McCarran-Ferguson Act. With respect to the claims bar date, the district court concluded that it was bound by a controlling 1993 First Circuit decision finding that the benefits provided to policyholders by a state's claims bar date were too tenuous for that provision to constitute the regulation of the business of insurance subject to McCarran-Ferguson protections.

The receiver filed a notice of appeal with the First Circuit Court of Appeals on the issue of the claims bar date. The government has similarly appealed the district court decision, continuing its challenge of the state liquidation priority statute. On March 25, NOLHGA filed an amicus brief with the Court of Appeals, again providing support for the receiver's position on both issues. Amicus briefs were also filed on behalf of the NCIGF and several of the affected insurance guaranty funds. Briefing continues in this matter, and no hearing has yet been scheduled. For further information, contact Joni Forsythe at 703.787.4103 or [email protected].

  Staff Contact - Joni Forsythe

NOLHGA Files Amicus Brief with Ohio Supreme Court

On April 10, NOLHGA filed an amicus curiae brief with the Ohio Supreme Court supporting the liquidator's challenge of a Court of Appeals ruling that claims arising under reinsurance contracts constitute "claims under policies" within the meaning of the Ohio priority statute and are therefore entitled to treatment as class 2 policyholder-level claims.

This matter arose out of the Ohio General Insurance Company insolvency and was initiated by a reinsurance creditor seeking to challenge the liquidator's classification of its reinsurance claims as class 5 (general creditor) claims under Ohio's priority statute. The trial court affirmed the liquidator's classification, finding legislative intent to afford direct policyholders priority over reinsurance claims. The Court of Appeals reversed, however, concluding instead that the term "policies" is broad enough to include all contracts of insurance. In reaching its conclusions, the Court of Appeals rejected arguments based on legislative intent and similarly rejected the reasoning set forth in case law from other states finding reinsurance claims to be ineligible for policy-level treatment based on public policy grounds.

In October 2001, the liquidator filed a request for review by the Ohio Supreme Court. NOLHGA, the NAIC, and the NCIGF each filed amicus briefs in support of the liquidator's request for review. In February, the Ohio Supreme Court ruled in favor of allowing the appeal, notwithstanding formal opposition by the reinsurer. The liquidator's opening brief on the merits was filed on April 10. At that time, NOLHGA, the NAIC, and the NCIGF each filed amicus briefs in support of the liquidator's position on the merits. The reinsurer's opening brief is due filed by May 10, and any reply briefs would be due filed within 15 days thereafter. Oral argument has not yet been scheduled.

If you have any questions about the case, please contact Joni Forsythe at 703.787.4103 or [email protected].

  Staff Contact - Joni Forsythe

Conflicts Surveys and Antitrust Certifications Due Immediately

Anyone who has not yet returned the NOLHGA Conflicts Questionnaire and/or Antitrust Certification Form should do so as soon as possible.

So far, NOLHGA has received approximately 85 percent of the necessary responses. More continue to arrive every day, and we appreciate everyone's efforts in completing and returning the materials. If you have not completed the questionnaire and/or certification form, please do so and fax the document(s) to Aimee Frye at 703.481.5209 immediately. We will be glad to provide additional forms to anyone upon request (Aimee can be reached at 703.787.4115). Your assistance in this matter is greatly appreciated.

  Staff Contact -