He Should Know
I happened upon the article "One Long, Long Mission," (Risk and Insurance®, March 2007, p. 36) by James Schacht and Lynne Hepler. I have a few comments. I was chief counsel and a special deputy insurance commissioner for the California Insurance Commissioner in connection with the Mission Insurance Co. insolvency. As Mr. Schacht knows, both Bill Price and I had quite substantial prior experience. Mine can be reviewed at www.Insurance-Solutions.us.
More significantly, Mr. Schacht also knows that, if an insurer cannot meet its policyholder liabilities as they come due, the company is insolvent, regardless of whether it is able, more than two decades later, to pay creditors. Paying some policyholders immediately and others over a period of 20 years would violate statutory mandates and be an illegal preference.
The reason the companies ultimately paid policyholders was because my firm Rubinstein & Perry and the administration under Bill Price sued and recovered more than $2.6 billion from these recalcitrant reinsurers. Further, we did try to find a workable rehabilitation plan for the Mission companies. Indeed, we successfully rehabilitated Mission American Insurance Co., and payments from this plan over the ensuing years have aided the payment of the creditors of the other Mission entities.
We did win the litigation over the offset issue in that the reinsurers were denied the right to set off on a "company-to-company" basis. They were allowed certain offsets on a "contract-by-contract" basis, but the California Supreme Court decision was a 4-3 decision with a blistering dissent in our favor.
Mr. Schacht was a deputy commissioner in the Illinois Department of Insurance, and that is why I say he should know these things. One would like to compare the Mission insolvency to Mr. Schacht's own track record at the Illinois Department.
Corpus Christi, Texas
May 1, 2007
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