1. The above-stated losses paid by the California Insurance Guarantee Association have been reduced to reflect $3,341,959 that the Commissioner has recovered from a surety bond posted in 1999 by Great States to cover its California losses for unpaid workers' compensation claims, pursuant to the provisions of Insurance Code section 11690 that were in effect at the time. That recovery will be remitted to the California Insurance Guarantee Association. Similarly, the reported losses paid by the Special Fund of the Industrial Commission of Arizona have been reduced to reflect $2,378,959 that Arizona has recovered from a similar surety bond posted in 1999 by Great States to cover its Arizona workers' compensation losses, pursuant to the provisions of section 23961(D) of the Arizona Revised Statutes that were in effect at the time, and which has been remitted to the Special Fund. Although such recoveries do not technically constitute assets of the Great States estate subject to offset pursuant to Insurance Code section 1035.5, subdivision (d), they do have the effect of reducing the losses of both California and Arizona, and both states have consented to having the surety recoveries treated in this fashion.
(See attached Exhibit B ("3rd quarter 2005 Early Access Distribution Detail of individual IGA distribution amounts").)
There are no statutory deposits on deposit in the states of Arizona, California, Colorado, Nevada or Texas. Accordingly, the Commissioner will distribute the above-referenced amounts without applying an offset of a statutory deposit as set forth in Insurance Code section 1035.5, subdivision (d). In distributing $ 18,620 to the Illinois Insurance Guaranty Fund, the Commissioner has offset statutory deposits of Great States on deposit with the State of Illinois in the total amount of $50,183. (See attached Exhibit B ("Great States 3rd quarter 2005 Early Access Distribution Detail of individual IGA distribution amounts").)
No distribution will be made to the New Mexico Property & Casualty Insurance Guaranty Association, which has paid $3,346 in losses and loss adjustment expenses on behalf of Great States, because as of September 30, 2005, Great States had $210,000 on deposit with the State of New Mexico to offset any payments made by the New Mexico Property & Casualty Insurance Guaranty Association on behalf of Great States claims. After offsetting the payments made by the New Mexico Property & Casualty Insurance Guaranty Association against the statutory deposits, Great States still has $209,245 in statutory deposits available to cover payments made by the New Mexico Property & Casualty Insurance Guaranty Association. (See attached Exhibit B ("HIH Insurance 3rd quarter 2005 Early Access Distribution Detail of individual IGA distribution amounts").)
In accordance with Insurance Code section 1035.5, subdivision (b)(l), the Commissioner has reserved certain amounts of the estate's assets for the payment of expenses of administration and the payment of claims of secured creditors and claims falling within the priorities established in Insurance Code section 1033, subdivisions (a)(l) and (a)(2). Subtracting the total proposed distribution of approximately $5,000,000 from available net assets of $14,060,123 leaves remaining net assets in the amount of over $9 million for the payment of , expenses of administration, and all other unrecorded liabilities and contingencies. If closure of the Great States estate is not imminent, the Commissioner will seek approval of an additional early access distribution when such liabilities and contingencies become known and are quantified.
In accordance with Insurance Code section 1035.5, subdivision (b)(4), the Commissioner will secure from the guaranty funds receiving a distribution an agreement to return the distributed assets, as required, to pay claims of secured creditors and claims falling within the priorities established in Insurance Code section 1033, subdivisions (a)(l) and (a)(2). (A true and correct copy of the draft agreement is attached as Exhibit D; a true and correct copy of a modified version of the draft agreement for the guaranty funds of California and Arizona, which clarifies that surety bond recoveries will be deducted from the reported losses of each respective fund, is attached as Exhibit E.)
As detailed above, the Commissioner has complied with the requirements of Insurance Code section 1035.5 for disbursement of assets to insurance guaranty associations and, accordingly, this Court should approve the instant application.
WHEREFORE, the Commissioner respectfully requests, based on this Application, that this Court issue an Order:
- Approving the Commissioner's proposal to disburse a total of approximately $5,000,000 of the net assets of the estate of Great States to the six (6) state guaranty associations and funds set forth above and in the amounts set forth above, made subject to the execution of an agreement with each guaranty association or fund to return the distributed assets, as required, to pay claims of secured creditors and claims falling within the priorities established in Insurance Code section 1033, subdivisions (a)(l) and (a)(2).
- Authorizing the Commissioner to transfer a total of approximately $5,000,000 of the net assets of the estate of Great States to the six (6) state guaranty associations and funds set forth above and in the amounts set forth above, made subject to the execution of an agreement with each guaranty association or fund to return the distributed assets, as required, to pay claims of secured creditors and claims falling within the priorities established in Insurance Code section 1033, subdivisions (a)(l) and (a)(2).
- Authorizing the Commissioner to take any and all action necessary to accomplish the purposes of the Order requested herein.
Dated:
12/21/2005
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BILL LOCKYER
Attorney General
RANDALL P. BORCHERDING
Supervising Deputy Attorney General
ANNE MICHELLE BURR
Deputy Attorney General
DAVID LEW
Deputy Attorney General
David Lew
DAVID LEW
Attorneys for Applicant Insurance Commissioner
of the State of California
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VERIFICATION
I, Mohsen Sultan, state that I am an Estate Trust Officer for the California Insurance Commissioner's Conservation & Liquidation Office. My duties include managing and supervising for the Conservation & Liquidation Office the administration of insurance companies that have been conserved and liquidated by the California Insurance Commissioner. Since April 2005, I have been managing the affairs of Great States Insurance Company.
I have read the VERIFIED APPLICATION FOR ORDER AUTHORIZING PROPOSAL FOR EARLY DISTRIBUTION OF ASSETS TO STATE INSURANCE GUARANTY ASSOCIATIONS OR FUNDS and know the contents thereof; If called upon to testify, I could competently testify to matters contained in the Verified Application as they are personally known to me, except as to the matters which are therein stated upon information and belief and as to those matters, I believe them to be true. The statements contained in the Verified Application are based upon information that has been assembled by authorized employees of the Conservation & Liquidation Office from the official records maintained there under my supervision. I am informed and believe that the statements based upon those records are true. As to those matters that are within my own personal knowledge, the statements are true.
I declare under penalty of perjury that the foregoing is true and correct.
Executed on December 19th, 2005 in San Francisco, California.
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Mohsen Sultan
Mohsen Sultan
Estate Trust Officer
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