The Insurance Commissioner of the State of California, as liquidator of the Superior National Insurance Companies (the "Liquidator"), and Centre Insurance Company ("CIC"), have settled longstanding differences between them regarding CIC's transactions with various Superior National entities. The settlement in the case of Insurance Commissioner v. Centre Insurance Company, et al. results in a comprehensive resolution of the disputes between the Liquidator and CIC and its affiliated entities.
The case, originally filed on January 16, 2002, was principally a preferential transfer action that involved claims against the defendants of approximately $250 million. The settlement will result in substantial recoveries for the estates of Superior National and eliminate significant ongoing costs of the litigation. As part of the settlement, CIC will transfer assets to or for the benefit of the Liquidator having an aggregate estimated value of up to $110 million, comprised of $80 million in cash; $20 million to be paid from the proceeds of certain securities with such payments guaranteed by a surety bond; and up to an additional $10 million to be paid from the proceeds of certain securities, with $5 million of this last $10 million conditionally guaranteed by the same surety bond being used to guarantee the payment of the $20 million. CIC has advised the Liquidator that CIC has already reserved for this settlement.
Under the settlement, the Liquidator is also permitted to release funds ($22 million) that are currently being held in reserve by the Liquidator pending resolution of certain CIC claims. In addition, at the election of the Liquidator, CIC and other defendants would also withdraw all of their claims against the estates of the Superior National insurers, or assign them to the Liquidator which total approximately $780,149,305, and constitute approximately 90% (by amount) of all claims pending against the SNICIL estates, exclusive of claims by guaranty associations and "contingent" or "unliquidated" claims.
The settlement should streamline the issues with which the Liquidator must contend, lower costs of estate administration, and expedite the ultimate closure of these insolvent estates. The bulk of the recoveries will ultimately be channeled to the California Insurance Guarantee Association ("CIGA") and used to pay workers' compensation claims against the insolvent entities.
The settlement benefits CIC and the Liquidator in that it resolves extensive and complex claims and regulatory issues relating to business transactions between CIC and the Superior National insurance companies now in liquidation without the need for further costly and protracted litigation. The settlement must be approved by the Court that is presiding over the liquidation of the estates of the Superior National insurers. The court hearing date to review the settlement is scheduled for February 17, 2005.
