On March 6, 2000, the Los Angeles Superior Court appointed the Commissioner as Conservator of Superior National Insurance Company, Superior Pacific Casualty Company, California Compensation Insurance Company, and Combined Benefits Insurance Company. On June 9, 2000, the Court appointed the Commissioner as Conservator of Commercial Compensation Casualty Company. On September 26, 2000, the Court appointed the Commissioner as Liquidator for these five insurance companies (collectively, the "Superior National Insurance Companies in Liquidation" or "SNICIL"). The value of the property and assets of the SNICIL entities exceeded approximately $1.4 billion.
The Insolvent Companies' offices were closed and on September 30, 2003, the Insolvent Companies remaining operations were consolidated into the Commissioner's Conservation and Liquidation Office located in San Francisco ("CLO").
Prior to the appointment of the Commissioner as Conservator, in 1998 the five Superior National companies: Superior National Insurance Company, Superior Pacific Casualty Company, California Compensation Insurance Company, Commercial Compensation Insurance Company, and Combined Benefits Insurance Company entered into a reinsurance contract with US Life Insurance Company ("US Life") wherein US Life agreed to reinsure the Superior National companies from liability for losses related to workers' compensation policies written after May 1998. In 1999 US Life initiated arbitration proceedings against the Superior National companies seeking rescission of its reinsurance contract alleging that the Superior National companies made misrepresentations and failed to disclose material facts. The Superior National companies in turn sought to enforce the contract against US Life.
After 7 years of arbitration proceedings, the reinsurance contract was upheld and damages awarded to SNICIL. The arbitration award was confirmed by the court, and judgment was entered in favor of SNICIL. US Life appealed. On January 4, 2010 the Ninth Circuit Court of Appeals affirmed the judgment against US Life. US Life elected not to seek review from the US Supreme Court and paid the SNICIL estates approximately $529 million from U.S. Life Insurance Company, an American International Group (A.I.G.) subsidiary, in partial satisfaction of the judgment confirming the Final Arbitration Award in favor of the Superior National Insurance Companies. The payment was made on June 18, 2010 pursuant to an agreement between the parties. Under the terms of the agreement, the California Insurance Guarantee Association immediately received $186 million to apply to their Worker's Compensation account. The balance of $343 million was received by the estates for future distributions to Superior National Insurance Companies' creditors pursuant to California Insurance Code Section 1033.
This is a huge success realized after nearly ten years of contentious arbitration and litigation. The payment contains $185 million in interest which reflects the tenacity and duration of the disputes related to reinsurance contract between U.S. Life and the Superior National Insurance Companies.
The Superior National team has committed to distribute the majority of the recovered funds after obtaining approval from the liquidation court. On September 10, 2012, the Los Angeles Superior Court approved the Commissioner's Ninth Early Access Distribution application and the Superior National team completed the distributions on September 18, 2012. A Tenth Early Access Distribution is currently scheduled for the 3rd quarter of 2013.
For a more comprehensive understanding of the estates, please refer to the current Liquidator's Further Status Conference Statement for Lead Case.