Frontier Pacific ("FPIC") is a California-domiciled wholly owned subsidiary of the New York-based parent company, Frontier Insurance Company ("FIC"). In August 2001, FIC voluntarily placed itself in rehabilitation with the New York Department of Insurance. As a result of the Rehabilitation, FIC cut off certain monies to FPIC. This prompted the California Department of Insurance to examine FPIC and it was determined that the company was insolvent, thus placing it into conservation on September 7, 2001.
The Liquidation Order was signed on November 30, 2001, requiring policy cancellations to be mailed for FPIC policies in effect as of December 30, 2001. The files and data within the various systems increased the complexity of disengaging from the FIC organization, determining a separation of co-mingled electronic and hardcopy files, and establishing a process to handle all claims issues, particularly in the reinsurance arena.
Due to the volume of necessary cancellations and problems with FPIC data integrity, not all cancellations met the deadline, and the cancellation process was not completed until March 2002. It was discovered that the insureds, which had FPIC surety bonds as a condition of their licensure by the State of California, would be affected by license cancellations. Therefore, the Commissioner obtained an order extending the cancellation date to January 30, 2002.
Complicated issues surround reinsurance including surety bond cancellations as a result of co-mingled files between FIC and FPIC. Efforts to sort out the differences are underway to resolve claims and collect reinsurance monies.
Issues around data integrity have been resolved in order to calculate the unearned premium (premiums pre-paid by policyholders, but not used by policy cancellation) and distribute refund checks early 2003.
