Please take notice that on the 24th day of April, 2009, at the hour of 8:30 a.m., or as soon thereafter as the matter may be heard, Steve Poizner, Insurance Commissioner of the State of California, in his capacity as Trustee of the Mission Insurance Company Trust, the Mission National Insurance Company Trust and the Enterprise Insurance Company Trust ("Insurance Commissioner"), will appear in Department 50 of the Los Angeles Superior Court, Stanley Mosk Courthouse, 111 North Hill St., Los Angeles, CA 90012, and present a motion to approve distribution to the general creditors of Enterprise Insurance Company Trust ("Enterprise").

Prior distribution motions approved by this Court have permitted distributions of the principal sums due to all policyholders of Enterprise. Enterprise has a limited number of general creditors, which this motion will address.

Enterprise's general creditors may be divided as follows:

1.        companies affiliated with Enterprise;
2.        claimants with claims of one hundred dollars or less, 188 claimants totaling $ 18,492.45; and
3.        claimants with claims in excess of one hundred dollars, 59 claimants totaling $545,503.

The motion will seek permission to make a first and final distribution to general creditors other than the companies affiliated with Enterprise, up to 73.2 % of their claims. This distribution percentage is based upon the projected ultimate value of their claims, after collection of the projected assets.

The motion will seek permission to make an interim distribution of 12.7% to the companies which are affiliated with Enterprise.

In support of the motion, the Insurance Commissioner will show that the continued inclusion and cost to administer the remaining unaffiliated general creditor claims of the estate will create a risk that the cost of multiple future distributions will impose administrative expenses upon the general creditor class that will likely diminish the ultimate distribution percentage available to the remaining claimants. As the unaffiliated claimants comprise 1.5 % of the total claims against the trust, the Insurance Commissioner now proposes to make a first and final distribution to these general creditors on their proofs of claim, so that the further administration of the trust will not require the expense of a mailing and processing with regard to the un-affiliated general creditors.

The percentage dividend proposed for the creditors is as follows:

1.         General creditors which are not affiliated with Enterprise:

   73.2% of the principal amount of their claims, in a first and final distribution; and

2.         The affiliated general creditors, an interim and non-final distribution of 12.7%.

   The motion will be supported by the Declaration of Raymond Minehan, as well as the accompanying memorandum of points and authorities.

Wherefore, premises considered, the Court is requested to grant this motion and order that:

1.         Distribution be made to general creditors which are not affiliated with Enterprise as 73.2% of the principal amount of their claims, in a first and final distribution;
2.         Distribution be made to the affiliated general creditors as an interim and non-final distribution of 12.7%; and
3.         All other just and equitable relief.

Memorandum of Points and Authorities

Enterprise previously paid to policyholder priority creditors one hundred cents on the dollar of the principal amount of their claims. Enterprise has not paid any distributions to general creditors of the trust. Enterprise has two principal assets:

1.        Cash and cash equivalent assets in the amount of $ 6,319,544; and
2.        An entitlement to distribution from Mission Insurance Company Trust on an allowed proof of claim.

The largest dollar amount of allowed general creditor claims against Enterprise is held by others among the Mission Insurance Company Trusts. These claims account for all but $563,995 out of the total of $36,120,290 of allowed general creditor claims. Of those general creditor claimants who are not affiliates of Enterprise, some $18,492 are owed to claimants which have claims of one hundred dollars or less.

The Insurance Commissioner seeks to make a distribution to general creditors of Enterprise. Based on the cash on hand, the current distribution percentage for an interim distribution would be 13.6% of the cash on hand. However, distribution of this sum creates a risk of increased administrative expenses. This is because the mailings required to the non-administrative claimants of multiple partial distributions would involve an administrative expense to send out checks that in some cases will be for very small distributions.

The Insurance Commissioner's projection is that the ultimate distribution to general creditors will be 73.2% of the principal amount of each creditor's claims. The difference between the 13.6% distribution based on cash on hand now, and the 73.2% projected ultimate distribution is the fact that Mission Insurance Company Trust is projected to make an ultimate distribution to general creditors such as Enterprise, but cannot do so at this time due to:

1.        the need to collect sums on an approved proof of claim from Holland-America Insurance Company Trust; and
2.        the need to reserve funds for unexpected contingencies.

This motion seeks to pay the claimants other than the affiliates a first and final distribution of 73.2% of their allowed claims. California Insurance Code Section 1037(a) permits the Insurance Commissioner the authority do such acts as are necessary and expedient to protect the insurer's assets, property and business. The proposal made is to make the following distributions:

1.        a first and final distribution of 73.2% to unaffiliated claims; and
2.        an interim distribution of 12.7% to the affiliated claimants, and a provision that all further distributions shall be made to the affiliated claimants.

The Declaration of Raymond Minehan supports this motion. The basis for the difference in distribution treatment is that a regime in which interim distributions are made to non-affiliated creditors will result in a series of small interim checks being written to a number of small creditors. The motion proposes to resolve this issue by making a single distribution to these smaller creditors (who make up 1.5% of the total sums owed to general creditors), thus eliminating the extra costs disproportionately associated with those general creditors.

The motion uses the projection of 73.2% based upon a calculation of the ultimate projection of what these creditors are likely to receive. Mr. Minehan attaches a spreadsheet which sets forth the calculations to support these sums.

Some risks exist in approval of the motion. It is possible that the 73.2% will prove high or low, which could result in a modest risk of a preference in favor of or to the prejudice of the small creditors. This risk, however, is quantified as an unlikely risk, and as a risk which is outweighed by the administrative savings to the Trust of the proposed distribution. The right of a claimant in a liquidation is to receive the liquidation value of his or her claim. Carpenter v. Pacific Mut. Life Ins. Co., 10 Cal. 2d 307, 335 74 P.2d 761, (1937), affirmed 305 U.S. 675, 59 S. Ct. 355, 83 L. Ed. 437, 1939 (1939).

California Insurance Code Section 1033 provides for the priority of general creditors. The Insurance Commissioner's proposal provides for the administrative advantage of removing numerous claimants from the mailing list, using a projection of the likely recovery of these claimants to address the de minimus percentage interest in the estate. Use of projected values has precedent in insurance receiverships. Daniel v. Layton, 75 F.2d 135 (7^th Cir. 1937). This case was cited with approval in Garris v. Carpenter, 33 Cal. App. 2d 649, 92 P.2d 688, 1939 Cal. App. LEXIS 287 (Cal. App. 1939), in which the court held that the Insurance Commissioner as receiver could secure reinsurance to protect claimants, even over the objection of certain of the creditors. The Insurance Commissioner can act on behalf of the entire group of creditors, even if an individual creditor might argue for a different treatment. In re Executive Life Ins. Co., 32 Cal. App. 4th 344, 376, 38 Cal. Rptr. 2d 453, 1995 Cal. App. LEXIS 129, 95 Cal. Daily Op. Service 1166, 95 D.A.R. 2051 (Cal. App. 2d Dist. 1995).

The proposed distributions in this matter advance the closing of the trusts by making a final distribution to Enterprise non-affiliated general creditors, thus getting these creditors a distribution and simplifying the administration of the estate. Accordingly, the Court is respectfully requested to approve this distribution plan as to these creditors.

Conclusion:

The Court is requested to approve this further distribution to creditors of the Enterprise, which includes use of a projection mechanism to give a first and final distribution to 1.5% of the creditors of the trust, while using an interim distribution for the remaining creditors.

Declaration of Raymond Minehan

I, Raymond J. Minehan, hereby make the following declaration in San Francisco, California under penalty of perjury:

1.       I am Raymond J. Minehan. I am over the age of eighteen years. I am competent to be a witness. I have personal knowledge of the facts to which I attest. I acquired my personal knowledge in my role as Chief Financial Officer of the Conservation and Liquidation Office which assists the California Insurance Commissioner. I have over twenty years' experience in the preparation of financial statements and am familiar with Enterprise.
2.       I attach as Exhibit "A" a spreadsheet which shows the distribution proposal in issue in this matter. Enterprise has over six million dollars cash in hand, but its primary asset is an anticipated recovery from Mission Insurance Company Trust. Mission Insurance Company Trust, in turn, awaits a substantial recovery from Holland-America Insurance Company Trust, in Missouri.
3.       If an interim distribution were made to all general creditors, the percentage distributed would be in the range of 13.6 %. However, this would create administrative inefficiencies, because a substantial number of claimants would receive checks for fewer than twenty dollars, and 1.5% of the claimants, those not affiliated with Enterprise, would require their distributions to take place over a series of mailings.
4.       The instant motion instead proposes to distribute 12.7% on an interim basis to the affiliated creditors of Enterprise and 73.2% in a first and final payment to all other approved general creditors. Although it is possible that 73.2% may not prove to be the final recovery to which those non-affiliated general creditors would one day receive, the figure of 73.2% is our best projection of what they are likely to receive. This motion seeks approval to pay that so that the expense of administering distributions does not reduce the overall distribution to general creditors.
5.       After balancing the risk of additional costs of administration against the risk of mathematic imprecision and potential preference, it is my recommendation that the Court approve the proposed distribution to general creditors as set forth herein.

I hereby execute this declaration in San Francisco, California and declare the foregoing facts to be true and correct under the penalty of perjury on this 25 day of February 2009.