Tennessee Sets Deadline for Claims Against 3 Failed Insurers

A Tennessee judge has set May 16 as the final date to resolve all outstanding claims against three insolvent risk retention groups that were closed in 2003 after the failure of their Virginia reinsurer, Reciprocal of America.

Three Tennessee companies – the American National Lawyers Reciprocal, the Doctors Insurance Reciprocal and the Reciprocal Alliance– were risk-retention groups that reinsured virtually all their business with Reciprocal of America (ROA), a Glenn Allen, Virginia-based company that was placed in receivership in January, 2003 after regulators discovered its liabilities exceed its assets by more than $200 million. The three risk retention groups operated under common management.

Tennessee regulators stepped in and shutdown the three-state domiciled companies following the failure of ROA. The former medical malpractice and workers’ compensation insurer’s failure spawned numerous lawsuits including charges that the company’s executives worked for years to conceal its deteriorating financial condition.

Following a request by Tennessee Insurance Commissioner Julie Mix McPeak as special receiver, Justice Russell Perkins of Tennessee’s Twentieth Judicial District court has imposed a final deadline of May 16 to liquidate all claims. Perkins said that the deadline is warranted to provide closure to what has been a long drawn out process of trying to settle the companies’ estates.

The court order states that all claims against the companies must be submitted by May 16. The court also orders that any claim submitted after the date of the order and May 16 must carry with it some explanation why the claim wasn’t made earlier. Further, the court found that all outstanding unliquidated claims must be settled at a specific dollar amount or denied by the receiver.

In 2008, Virginia insurance regulators dismissed the claims of the three insolvent Tennessee risk retention groups against ROA, ruling that as reinsureds of ROA, the three insurers were general creditors and not policyholders under the Virginia insurer liquidation statute.