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"), hereby submits this Status Report and advises the Court as follows:
- Insurance Commissioner's Closing Status
These estates are in closing mode, with the substantial portion of the assets of the estates distributed to policyholders and general creditors. A substantial sum is being held in reserve in the trusts, pending final wind-up. Sums continue to be collected from the reinsurance debtors of the estates, including in particular insolvent reinsurers which owe the Trusts reinsurance proceeds. Financial Statements as of December 31, 2006 for Mission Insurance Company, Mission National Insurance Company, and Enterprise Insurance Company are attached hereto as Exhibit "A." Several items are underway to further facilitate the wind-up process, which will be discussed in this status report.
A number of claimants did not maintain good addresses with the Trustee, resulting in a need to escheat the unclaimed funds. Reconciliation efforts began in preparation to escheat funds in 2007. Escheatment logistics of all unclaimed funds for Mission Insurance Company Trust, Enterprise Insurance Company Trust and Mission National Insurance Company Trust are expected to be completed later in 2007.
The Enterprise Insurance Company Trust made a further distribution to policyholders in accordance with this Court's order in connection with its re opening for this purpose. An Enterprise Insurance Company Trust Declaration of Compliance has been filed with the court on December 29, 2006 for the estate's re-closure.
The shares distribution for Mission Insurance Company, Mission National Insurance Company, and Enterprise Insurance Company remains pending, subject to further discussions on implementation with Covanta Holding Corporation. Discussions of logistics to carry out the stock distribution and compliance with applicable Internal Revenue Code rules are in progress.
An Agreement Regarding Special Deposits and Letter Agreement has been executed with the Oregon ancillary receiver for the return of the excess special deposits for Mission for the amount of thirteen million four hundred ninety-six thousand three hundred fifteen dollars ($13,496,315). Discussions are underway with the few remaining states, New Hampshire and New York, which have ancillary estates, seeking similar wind-up of those estates and return of any excess funds.
Reinsurance collections brought in one hundred eight thousand eight hundred dollars ($108,800) in February 2007, while a contribution recovery for Mission National Insurance Company brought in one hundred thirty-seven thousand six hundred fifteen dollars ($137,615). Further collections are anticipated in the future, including without limitation a significant distribution upon the wind-up of Holland America Insurance Company Trust.
This Court has previously approved the Rehabilitation Plan Implementation Agreement with Covanta Holding Corporation. Pursuant to this plan, Covanta Holding Corporation assumed the duty to process the Latent Deficiency Claims. An insert to this report from Covanta Holding Corporation expressing its progress is set forth below.
- Covanta Holding Corporation's Statement for the Status Report:
Covanta Holding Corporation provided the following insert for the status report:
On March 2, 2006, the Court issued an Order approving the Rehabilitation Plan Implementation Agreement entered into between the Commissioner, as Trustee of the Mission Insurance Companies Trusts and Covanta Holding Corporation. In order to implement the Rehabilitation Plan Implementation Agreement, the Commissioner and Covanta also entered into the Latent Deficiency Claims Administration Procedures Agreement (the "Claims Agreement"). The Claims Agreement requires Covanta to administer a Latent Deficiency Claims administration process whose purpose is to evaluate each of the individual Latent Deficiency Claims for each of the Mission Insurance Companies Trusts in order to ensure that any distribution of Covanta common stock to those claimants complies with the stock for debt provisions of former section 108(e)(8)(B) of the Internal Revenue Code.
In order to complete this task, the Trustee provided Covanta's claims personnel with access to the claims records and proofs of claim filings for each of the Mission Insurance Companies Trusts. The Covanta claims personnel then undertook the review of over one hundred seventy thousand (170,000) proofs of claim filings and claims determinations for those Trusts. As part of this process, Covanta identified and valued approximately forty-two thousand (42,000) Latent Deficiency Claims. A combined mailing notifying these claimants of the determined value of their claims and the claims evaluation processes was completed by mid November 2006. The instructions also advised the claimants that they could file an Updated Proof of Claim with supporting documentation in order to assist Covanta in evaluating their claims. The claimants were provided with instructions to file Updated Proofs of Claim either on the Covanta web site or directly with Covanta's claims counsel, depending on the nature of their claims. The Updated Proofs of Claim allowed the claimants to supplement their original claims filing with the Trusts with additional information concerning the development of their claims since their last filings with the Trusts. In mid January 2007, a supplemental mailing of Notices of Determination for approximately three hundred thirty (330) large loss insureds and insurance guaranty associations was completed.
Also at this time, Covanta received approximately one hundred fifteen (115) Updated Proofs of Claim with supporting documentation. Covanta obtained the appropriate claims files from the Trustee; completed the review of the least complicated and most straightforward of these Updated Proofs of Claim; and, determined the value for these claims. Covanta has begun the process of issuing Notices of Final Determination to these claimants which should be completed by the first of April 2007.
There are approximately twenty (20) Updated Proofs of Claim which involve complex asbestos, pollution, and mass toxic tort claims. Covanta is currently reviewing the Trusts' files on these claims and the newly submitted claims information. Some of these claimants have been requested to provide additional supporting information to clarify their prior submissions. It is anticipated that the reviews and evaluations of these remaining claims will be completed before the end of April 2007. After the review is complete, Notices of Determination will be sent out to the remaining claimants.
Under the Claims Agreement, the claimants will have thirty (30) days in which to appeal their Notices of Final Determination. The appeals process consists of an administrative review by a retired Superior Court judge. The review will be based upon the written claims record previously filed with the Trusts and the information submitted in support of the Updated Proofs of Claim. The procedures provide for written submissions by the parties to the claims arbitrator, after which the arbitrator will rule based upon the written record. The prevailing party may then seek a court order enforcing the arbitration ruling.
Once the final appeals are completed, Covanta will be able to determine the final values of the Latent Deficiency Claims which will be used to determine the allocation of the Covanta common stock among the claimants. The timing of the completion of the claims review process will be dependant on the number and complexity of the appeals taken. Covanta is striving for a late third quarter, early fourth quarter 2007 completion date.
- Insurance Commissioner's Conclusion
The closing process proceeds forward. The completion by Covanta Holding Corporation of the remaining steps it is to complete under the Rehabilitation Plan Implementation Agreement will be an important milestone in the case. The Insurance Commissioner continues to collect sums due to the Trusts, but the case does not require frequent hearings in light of its status in closing process. The goal remains to collect the remaining assets and deal with the rehabilitation plan issues, so as to reduce the administration to the collection of the last sums due, and, upon passage of a sufficient time, distribution of the assets held in reserve. The Insurance Commissioner suggests that a further status conference be set in September 2007.
Respectfully submitted,