On June 24, Louisiana Insurance Guaranty Association (LIGA) Executive Director John Wells, in his written report, updated the LIGA board of directors on the recent insolvencies of Bedivere Insurance Co. and American Capital Assurance Corp. (AmCap).
Bedivere was placed in liquidation by the Pennsylvania courts on March 11. According to Wells, Bedivere was the surviving company in the December 2020 merger of three run-off insurers in the Trebuchet group, itself a part of the Armour group. The companies changed names in 2014 when they were acquired by Trebuchet from OneBeacon Group.
In his report, Wells points to several major complications that LIGA has faced with the Bedivere insolvency:
It was just a matter of weeks between the date the Pennsylvania Insurance Department (PID) was alerted to Bedivere’s situation and the date of the liquidation order. In February 2021, Bedivere was presented with a large judgment that forced Bedivere to approach the PID. “This provided little lead time for the receiver to prepare for the transition,” Wells wrote in his report.
The estate first worked to develop data on the workers’ compensation claims. Wells informed the board that, while the data was fairly clean, it delayed work on the asbestos claims. The asbestos claims are LIGA’s biggest concern, Wells wrote.
The data received by LIGA was very unorganized and incomplete. According to Wells, under one insured, LIGA received 20 claim files which appear to be more policy year accounting files, but LIGA knows that the insured has 300 to 400 active single-plaintiff lawsuits and 2,000 or more open but inactive multi-plaintiff lawsuits.
In addition, LIGA received a directory of thousands of miscellaneous unorganized documents. LIGA is currently working with the receiver, other guaranty funds, and former company staff to try to understand the data and past processing, while at the same time setting expectations of future incoming and outgoing data. LIGA is also working with defense counsels to get lists of lawsuits and claimants that are not readily available from the receiver.
Enforcing the LIGA stay
The plaintiff attorneys and judges initially were hesitant about the six-month stay order because cases had already been postponed for the past year due to the pandemic. According to Wells, LIGA General Counsel Stephanie Laborde was able to string together enough victories so that the issue seems somewhat resolved.
Lack of jurisprudence on law revisions
The legislature passed a Louisiana Department of Insurance bill aimed at aligning LIGA’s statute more closely with the NAIC Model Act. The statute clarified LIGA’s exhaustion of other insurance and its relationship to the LIGA claim limit and credits.
These laws are strongly worded in a manner to ensure the claimants’ ability to collect sums from insurance proceeds while limiting LIGA’s exposure, but according to Wells, the laws have not been fully vetted by the courts. The courts, in recent years, have issued additional decisions that affect the handling of asbestos claims.
Volume and complexity
While LIGA already had a sizeable portfolio of asbestos suits, the Bedivere estate brings 15 to 20 new asbestos defendants to LIGA. The defendants each have their own mix of coverages, defenses, other insurers, aggregates, and modes of operation. In some instances policy years have met aggregates, and there are some that need to be certified by experts.
LIGA already has increased staff, but according to Wells, LIGA may still have to hire additional staff because each week LIGA gets a little more clarity on the volume of claims LIGA will be managing. “Suffice to say that this estate is still a work in progress,” Wells wrote.
AmCap, a Florida-domiciled property insurer, specialized in multi-tenant dwellings such as apartments, condominiums, and nursing homes. LIGA received 26 claims that were assigned to one adjuster. In addition, LIGA contracted with Legion Claims to provide the adjuster with commercial property specialists.
According to LIGA Claims Manager Deidre Arceneaux, the majority of the 26 claims are 2020 hurricane losses involving apartment complexes concentrated in the southwest corner of the state. The claim filing deadline is Oct. 14, 2021, and she expects LIGA to get additional new claims as well as a few reopened claims.
LIGA expects a handful of the claims will not be covered, in part or in their entirety, due to either LIGA’s claim limit of $500,000 or LIGA’s exclusion for high-net-worth insureds.
In addition to the 26 claims, LIGA received 96 unearned premium records for policyholders that total $662,000. In 23 instances the premium exceeds the $10,000 unearned premium limit, reducing LIGA’s expected payout by $202,000 to $460,000.
Wells also reported that LIGA’s investment account had a market value, as of April 30, of $149,120,512 with a cost basis of $144,182,241. LIGA’s holdings, on a cost basis, consist of 16 percent corporate bonds and 84 percent U.S. Treasuries/Agencies.
Additionally in her report to the board, Arceneaux stated that, due to the Bedivere insolvency and the information that continues to develop, LIGA has increased its claim staff by adding two senior claim examiners and one claim assistant in the Environmental Claims Department.
Additional staff may be required moving forward when LIGA has determined the exact volume of asbestos claims and the claim handling procedures required.
Arceneaux reported that former LIGA Claims Manager Gerry Coryell has returned on a temporary basis and is focusing on the net worth determination of insureds across multiple insolvencies.
Arceneaux updated the board on the Gateway Insurance Co. and American Service Insurance Co. liquidations; both companies are domiciled in Illinois. Now that the six-month statutory stay has ended for both Gateway and American Service, she reported that litigation activity for both insolvencies continues to increase at a brisk pace. The net worth investigations are concluded on all insureds from both estates.
According to Arceneaux, LIGA received 129 claims from the Gateway liquidation and 190 claims from the American Service liquidation, with the majority of these claims involving litigation. LIGA currently has 80 open claims in the Gateway liquidation and 96 open claims in the American Service liquidation. Both companies sold policies in Louisiana that mainly covered taxi cabs, Uber/Lyft and non-emergency para-transit vehicles.
She reported to the board about the Capson Physicians Insurance Co., a Texas-domiciled carrier in liquidation. Capson, wrote medical malpractice insurance and was declared insolvent on June 28, 2019. LIGA currently has 52 open claims.
ACCC Insurance Company, a Texas-domiciled non-standard auto insurer, went into liquidation Dec. 14, 2020. While ACCC was an admitted company in Louisiana, no policies were in effect and no open claims existed in Louisiana at the time of the liquidation. According to Arceneaux, LIGA has now received 10 claims from other state guaranty funds where the ACCC insured resided in Louisiana at the time of the loss, and LIGA has accepted these claims. LIGA continues to work with the ACCC receiver to determine the appropriate state guaranty fund to handle any future claims presented.
LIGA has been notified of a possible future insolvency of a Texas-domiciled insurer that has been in run-off for 20 years. In late 2020, the insurers’ workers’ compensation policies were transferred to a solvent carrier but, according to Arceneaux, there are pending Louisiana claims in the insurer’s commercial general liability and specialty lines.
As of May 31, 2021, the claims department had 1,253 pending files: 737 are environmental, 150 are workers’ compensation, and 366 are auto and others. The pending claims do not include any of Bedivere’s environmental claims, which LIGA is just now starting to receive.
LIGA’s current reserves amount to $128,470,746 but, according to Arceneaux, this amount does not include AmCap’s claims or Bedivere’s environmental claims which will result in a substantial increase.
She reported that LIGA’s current filings with the Second Injury Fund are $156,776.45. There were $420,844.81 in recoveries in 2018, $385,515.48 in 2019, $372,754.41 in 2020, and $65,595.52 in recoveries so far this year.
Finally, Arceneaux reported that LIGA reviewed its attorney compensation rates for attorneys with both standard and specialized expertise, and that, effective June 1, LIGA increased its defense attorney fee schedule to the following: attorneys’ standard hourly rate is $155 per hour, attorneys’ hourly rate in medical malpractice cases requiring special expertise is $190 per hour, paralegals’ hourly rate is $90 per hour, automotive mileage is the current IRS allowable amount, and copying charges are 15 cents per page.