AMS Life (AZ)
Arizona Receiver Awarded $17.5 Million in Damages
On Sept. 5, the Arizona Receiver for AMS Life was awarded a judgment of $17.5 million in connection with its fraud and professional negligence claims against certain defendants that provided actuarial services to AMS Life prior to the initiation of the receivership proceedings in 1992.
The litigation, filed by the Receiver in 1997, alleged multiple counts of fraud and professional negligence in connection with the accounting and actuarial services provided to AMS Life from 1983 to 1991. Before reaching trial in June 2001, the Receiver obtained settlement agreements from several of the defendants resulting in recoveries of approximately $8.255 million for the estate, the most recent of which was approved by the court on March 30, 2001.
The case then proceeded to trial against the remaining defendants, which included the actuarial firm J. Huell Briscoe & Associates as well as certain individual defendants, collectively referred to as the "Briscoe defendants." As set forth in the findings of the court, the Briscoe defendants provided virtually all the actuarial services for AMS Life during the period at issue, including quarterly reserve calculations and year-end certification of reserves, and further provided information for annual statements. The court went on to note that the defendants knew or should have known that AMS Life was totally dependent upon the Briscoe defendants to provide timely and accurate actuarial services, and that their repeated failure to do so was a violation of their professional obligations to AMS Life, the state regulators and policyholders.
Following a lengthy bench trial that ended on July 13, the judge entered a ruling in favor of the Receiver on the issue of liability and requested post-trial briefing on the issue of damages. Briefing on damages continued throughout August. On Sept. 5, the trial judge made a 14-page minute entry on the docket outlining the court's findings in the case and determining the liability of the Briscoe defendants to be $17.5 million. The judge has further ordered that the Receiver submit proposed findings, as well as a proposed form of judgment consistent with the minute entry, and outlined a schedule for objections and responses to be filed throughout October and November. Thereafter, the final judgment order will be entered and the 30-day appeal period will begin to run.
Given the extended time frame the judge has established for formalizing the judgment and the likelihood of appeal, the Task Force has asked the Receiver to use available estate assets to make an early access distribution to the affected guaranty associations during the fourth quarter of 2001 rather than wait for final resolution of this litigation.
Task Force Chair - Luther Hill; Staff Contact - Joni Forsythe Bankers Commercial Life (TX)Outstanding Claims Inventory Nearly Finished
Nearly 40 percent of the pre-March 1, 2000, "box" claim inventory claimants have responded to the query mailed to them in June 2001, and most indicated that benefits had not been provided. New Era has completed processing the related claims, and funding should occur by the end of September. Although a small number of responses or new claims are anticipated in the near future, this will conclude the adjudication of the outstanding claims inventory for all practical purposes.
In related claims news, New Era has indicated that all claims for both the Medicare and non-Medicare blocks of business have been processed through Sept. 4. This is well within the established guidelines provided by New Era and indicates that there is no longer any claims backlog.
It is anticipated that certificates of coverage and related premium refund checks, if applicable, will be processed and mailed by Sept. 21 to all policies that have been canceled by the guaranty associations.
Representatives of the BCL Task Force were in attendance at the Sept. 17 meeting with the special master to provide a status report and discuss outstanding issues.
Task Force Chair - William Falck; Staff Contact - Paul Peterson Kentucky Central Life (KY)Updated Claim Finalized & Filed with Liquidator
PricewaterhouseCoopers has finalized its audit and review of the guaranty associations' unsatisfied claims against Kentucky Central Life, and NOLHGA filed an updated claim with the Kentucky Central Liquidator on Aug. 31. The remaining claim balance, which includes a compilation of the expenses incurred by NOLHGA and the guaranty associations as well as the post-closing policy benefits the guaranty associations funded during the five-year Kentucky Central plan period, totals more than $27 million through Dec. 31, 2000 (with interest through June 30, 2001).
As part of its review of outstanding claims, PricewaterhouseCoopers isolated the amounts paid and refunded for policy loans and determined that the total amount Jefferson-Pilot refunded to the guaranty associations for policy loans was deficient by what is now nearly $4 million. NOLHGA sent a formal notice of the deficiency and a request for immediate payment to Jefferson-Pilot on Aug. 31. Copies of the claim update and the deficiency notice to Jefferson-Pilot are available upon request to any guaranty association.
Task Force Chair - John Colpean; Staff Contact - Joni Forsythe