Kentucky Central Life (KY)

KCL Settles Claims Against Former Gov. Wilkinson

Based on a settlement announced last week, the KCL Liquidator will recover nearly $11 million from former Kentucky Governor Wallace Wilkinson to settle litigation relating to certain suspect real estate transactions between Wilkinson and KCL. The settlement will dispose of two separate lawsuits against the former governor relating to the Wilkinsons' personal guarantees of certain bond obligations used to fund the Park Plaza apartment complex in Lexington, and the Wilkinsons' 1987 sale of the Holiday Inn Capital Plaza to KCL for a price that appears to have been double the value of the property. Under the terms of the settlement, Wilkinson is to pay $9.35 million in cash to the KCL estate ($2.39 million at closing and the balance within six months), and transfer title to the 16 condominium apartments at the Holiday Inn Capital Plaza, which were retained by Wilkinson when the balance of that property was sold to KCL in 1987. The condominium apartments are valued between $1.6 and $1.7 million. In addition, the Liquidator expects that transfer of these remaining units to the estate will facilitate the marketing of the Holiday Inn property.

In other KCL news, NOLHGA has been named as a party defendant, along with the KCL Liquidator and Jefferson-Pilot, in an action filed in Washington Superior Court to collect proceeds alleged to be payable under a life insurance policy issued by KCL. It appears that NOLHGA was named as a party in this case due to the claimant's mistaken belief that NOLHGA is an insurance company that may have liability under the policy at issue. The complaint erroneously alleges that NOLHGA is licensed and doing business as an insurance company in the state of Washington. To date, NOLHGA has not been served and has not entered any appearance in the case. Apparently the KCL estate initially denied the claim under this life policy because the claimant was unable to provide evidence of death or establish whether the death occurred before or after KCL was declared insolvent. It appears that new evidence has emerged out of a civil wrongful death proceeding which may resolve the issues regarding the time of death. Discussions are ongoing between the claimant and the KCL estate in an effort to resolve the claim.

Task Force Chair - John Colpean;   Staff Contact - Joni Forsythe Centennial Life (KS)

Health Claim Audit Results

Claims Systems Auditors reported March 22 the results of audits of Centennial Health Block claim batches 10-15. The eight audits included over 500 cases, with claims of $1,300,000. Accuracy ranged from 93.7 to 99.9 percent, with a dollar-weighted average of 98.7 percent.

The Receiver on March 22 mailed Centennial Health Block claims batch number 17 to participating guaranty associations. Batch 17 includes 3,500 claims processed March 1-15, totaling $900,000.

Disability Management Alternatives plans to mail March LTD benefit checks March 26, for delivery by April 1. Monthly LTD benefit checks are now processed for delivery on the first day of each month, for the previous month's benefits.

ValueRX will cease providing drug card benefits to Centennial Health Block certificate holders March 31. From that date forward, claimants must pay for drugs, and submit claims to Centennial for reimbursement. Policyholders/claimants were notified March 10 by the receiver.

Task Force Chair - Mark Femal;   Staff Contact - Fidelity Mutual Life (PA)

Judge Orders Rehabilitator To Make Payments

Senior Judge Charles A. Lord of the Commonwealth Court of Pennsylvania on March 16 issued an order authorizing the Rehabilitator to pay, among other things:

1. the assessments for the years 1992 through 1997 to state guaranty associations which have agreed or agree to waive interest and other charges, and
2. the assessments of state guaranty associations for the years 1998 and after.

Assessments for affected states total $5.4 million.

This order is consistent with the FML Task Force's recommendation, reported at the Tucson MPC meeting, that guaranty associations accept payment of past due assessments without interest or penalties. The Rehabilitator expects to mail letters and releases to affected guaranty associations the week of April 5. Guaranty associations are encouraged to sign and return the releases promptly.

Task Force Chair - Frank Gartland;   Staff Contact - Sean McKenna AMS Life (AZ)

NOLHGA Served With Subpoena

On March 4, 1999, NOLHGA was served with a notice of deposition and request for documents pursuant to a subpoena duces tecum in connection with litigation pending in Arizona Superior Court. The case was initiated by the Liquidator to recover damages from various actuarial and accounting firms for losses in connection with the AMS Life insolvency. NOLHGA is not a party to the litigation. The subpoena is very broad and purports to seek the deposition testimony of a NOLHGA representative and documents relating to all aspects of AMS Life. NOLHGA's former consultant in this matter, Wolfman & Moscovitch, Inc., (now William M. Mercer Consulting) has also received a subpoena, as have the life and health guaranty associations and insurance departments in Illinois and Arizona. NOLHGA will be coordinating its production with William Mercer Consulting, the Illinois and Arizona Guaranty Associations and Liquidator's counsel.

Task Force Chair - Luther Hill;   Staff Contact - Joni Forsythe First National Life (AL)

Settlement Approved

Judge Greenhaw of the Circuit Court for Montgomery County, Alabama approved on March 4 a settlement bringing to a close litigation brought by Annie Banks against the First National Life estate (FNLIC). Generally, the settlement provides that a $1 million consent judgment will be entered in favor of Ms. Banks in her suit against FNLIC, which is currently pending on appeal in the Alabama Supreme Court. As part of the settlement, the Receiver will recognize the consent judgment as a claim against the estate, the parties will agree to mutual releases, and all other pending actions related to Ms. Banks' claim will be dismissed.

Ms. Banks obtained a jury verdict against FNLIC for $300,000 in compensatory damages and $1 million in punitive damages in September of 1996. FNLIC appealed the judgment to the Alabama Supreme Court, where the case was pending at the time of settlement. Pending at the circuit level was Ms. Banks' suit against the Receiver, filed in December of 1997 seeking damages on the theory that the receivership proceeding was filed with the intent to prevent her from collecting her judgment. Ms. Banks also sought to set aside all liquidation and rehabilitation orders on the basis of fraud. The receiver's action to enjoin Ms. Banks from pursuing her case against the receiver was also pending in the Alabama Supreme Court, on appeal from the circuit court's October, 1998 order denying the Receiver's motion for a preliminary and permanent injunction.

The settlement resolves these actions. The issue of the priority of the $1 million claim against the estate remains to be decided by the circuit court.

Staff Contacts - Angela Franklin 703.787.4105;   Staff Contact - Joni Forsythe

Insolvency Financial Reports

The annual two-volume Insolvency Financial Report will be mailed next week to state guaranty associations administrators, state board chairs and the NOLHGA Board. Volume one contains background information and policy liability information for individual insolvencies. Volume two summarizes policy liability data by state. The reports will include task force and NOLHGA expenses from inception through December 31, 1998.

  Staff Contact - Paul Peterson