Thunor Trust Companies
15 Day Opt-Out Period Begins Aug. 6
On August 5, NOLHGA sent by overnight express, opt-out packages for the service agreements among the affected guaranty associations and the receivers of First National Life of America, in Birmingham, Ala., and Franklin American Life Insurance Company, in Franklin, Tenn. Under the service agreements, the FNLA Receiver will service the business of FNLA, and the Franklin American Receiver will service the business of Family Guaranty Life, Franklin Protective Life, Farmers and Ranchers Life and International Services Life. The Members' Participation Council Executive Committee has authorized a 15-day opt-out period for these agreements.
The agreements formalize the arrangements whereby the receivers will administer the business on behalf of the affected guaranty associations until the completion of the bid process and the transfer of the business to one or more assuming carriers. An important feature of the FNLA agreement is the continuation of premium collection for FNLA policies through automatic bank checks and government allotments.
Task Force Chair - Charles LaShelle; Staff Contact - Centennial Life (KS)Other Block To Be Sold
The Task Force agreed to seek assumption of the small block of miscellaneous policies referred to as the Other Block. The task force actuary has prepared an information package on the in-force business that cannot be cancelled. As of March 31, 1999, the block includes the following:
Category Policy Count Face Amount Annualized Premium Reserve
Individual Life 519 7,265,000 29,705 108,994
Hospital Income Policies 55 --- 46,509 ---
Life Conversions 22 255,000 9,397 44,204
Medical Conversions 6 --- 29,969 ---
State Mandated Plans 1 --- 6,536 ---
Total 603 7,520,000 122,116 153,198
The project manager and the task force actuary contacted nine companies in July; seven have requested the information package.
Hearing Set for August 13th
The Oklahoma liquidation court has scheduled a hearing for August 13th on a series of motions filed by David J. Nicholas and other putative equity holders of American Standard Life (collectively "Nicholas"). In the on-going court battles surrounding this case, Nicholas filed a motion on July 15th to intervene as a party, apparently for the purpose of prosecuting claims on behalf of the estate against the Life Assurance Company of Pennsylvania ("LACOP") and the Pennsylvania Life and Health Insurance Guaranty Association ("PLHIGA"). All parties, including NOLHGA, have filed objections to Nicholas' attempt to intervene. In addition to noting that Nicholas' alleged claims against LACOP and PLHIGA have already been determined by the court, NOLHGA's brief argues that Nicholas lacks standing to intervene as a matter of both insurance insolvency law and basic corporate law. In addition, Nicholas fails to meet the standards for intervention outlined by Oklahoma law. The motion will be heard at the August 13th hearing.
On a related note, the court also will hear two motions filed by Nicholas regarding the Colorado ranch sale (ASL's principal asset located in Park County, Colo.). Nicholas has asked the court to reconsider its approval of the ranch sale based upon procedural deficiencies. In a separate motion, Nicholas asks the court to cancel the sale because closing did not occur on the date identified in the contract. The sale is now scheduled for closing on August 9th.
In addition to his district court motions, Nicholas has filed two appeals with the Oklahoma Supreme Court. As previously reported, Nicholas is challenging the District Court's dismissal of the Petition to Vacate ASL's Liquidation Order. (See Weekly Wire dated July 23, 1999.) NOLHGA will enter an appearance with the court on this matter in order to participate in the briefing should the court decide to accept the appeal. Nicholas also has petitioned the court for certiorari on the appeal of the $6 million state court judgment against him. The judgment was based upon Nicholas' conversion of ASL assets for his personal use. On March 30, 1999, the Oklahoma Court of Appeals affirmed the trial court's judgment, preserving the money judgment against Nicholas as an asset of ASL to be collected by the receiver. In his response to the petition for certiorari, the ASL receiver contends that the decisions of the lower courts were lawful, and that the limited statutory grounds for supreme court review are not present.
Task Force Chair - Andrea Bowers; Staff Contact - Bill O'Sullivan Kentucky Central Life (KY)Litigation Update
A decision is expected from the Franklin Circuit Court within the next three weeks on the Liquidator's motion to adjudicate the claims of the Mid-Central shareholders in accordance with the liquidation claim adjudication process.
This case involves an action initiated in the Circuit Court for Franklin County on behalf of certain shareholders of Mid-Central Investment Company, Inc., a subsidiary of KCL. The shareholders seek to collect approximately $12 million from the assets of Mid-Central which they argue they are entitled to be paid as Mid-Central's preferred shareholders. At the request of the Liquidator, NOLHGA intervened as a party to support the Liquidator's efforts for substantive consolidation. The Illinois and Texas guaranty associations and the Kentucky Public Employees Retirement Fund have also intervened in support of the Liquidator's position. The shareholders have filed a motion for summary judgment. The motion is scheduled for hearing on September 28, 1999.
The Liquidator has taken the position that the assets of Mid-Central should be consolidated into the Kentucky Central estate, consistent with his position in this case, and has filed a motion for substantive consolidation of the assets. The Liquidator has further asked the court to enter an order requiring the shareholders to adjudicate their claims in accordance with the procedures established for adjudicating claims against an estate in liquidation. The shareholders initially filed their claim against the estate and filed objections to the Liquidator's determination of their claim, while simultaneously pursuing the civil litigation. If the Liquidator's motion to adjudicate claims is successful, the issue of substantive consolidation of assets would be determined in the context of a hearing on the objections to claim determination, rather than by summary judgement in the civil action.
By order dated July 27, 1999, the Liquidator's motion to adjudicate claims was submitted to the circuit court for determination within 30 days in accordance with the local rules of court. Accordingly, a decision on this matter should be issued by August 26, 1999.
Task Force Chair - John Colpean; Staff Contact - Joni ForsytheLegal Committee Claims Valuation Subgroup Meeting
On August 3, the Claims Valuation Subgroup of NOLHGA's Legal Committee met in Denver to finish up discussions on guaranty association policy level claims. The group expects to submit an interim report to the Legal Committee at its September meeting. The group's next project is to consider valuation issues with respect to guaranty association administrative and general creditor level claims.
Staff Contact -Members' Participation Council
MPC and ADS Assessments Due
On August 4 second quarter assessments for 1999 Members' Participation Council insolvency expenses and Assessment Data Survey expenses were mailed to affected guaranty associations. Prompt payment is greatly appreciated. Please direct assessment questions to Jay Jagolta at 703/787-4109.
Directors' Orientation Presentation
The Administrators' Education Steering Committee will present a program on Directors' Orientation during the upcoming MPC meeting. The Committee would like to know if you have any questions or issues regarding director orientation, involvement and retention. Please direct your questions to Laura Langill who can be reached at 603.226.9114, or you may fax your questions to her at 603.224.6713.
MPC Reminder
If you plan to attend the MPC meeting scheduled Aug. 25 - 27 in Coeur d'Alene, Idaho, please note that the hotel does provide transportation to and from the airport. The cost is $30 per person round trip. Transportation arrangements must be made prior to arrival by calling the hotel at 800.688.5253. Questions regarding the meeting can be directed to either Kristen Howell at 703.787.4114 or Dana Woodward at 703.787.4118.
CALENDAR/CONFERENCE CALLS
August 10 Thunor Trust Task Force Meeting, Atlanta, GA
August 10 Centennial Life Working Group Meeting, Kansas City, MO
August 25 - 27 Members' Participation Council Meeting, Coeur d'Alene, ID