Settling with policyholders takes priority over suing Mission, judge tells reinsurers.Settling with policyholders takes priority over suing Mission, judge tells reinsurers Policyholders of failed Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. insurance giant Mission Insurance Co. may receive $800 million in benefits from reinsurers as a result of a recent Los Angeles Superior Court ruling. Judge Kurt J. Lewin on June 25 ruled that reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. companies, which assume risk for a primary insurer for a fee, could not renege on Verb 1. renege on - fail to fulfill a promise or obligation; "She backed out of her promise" go back on, renege, renegue on countermand, repeal, rescind, revoke, annul, vacate, reverse, overturn, lift - cancel officially; "He revoked the ban on smoking"; its obligations to Mission Insurance policyholders because the reinsurers believed themselves to be victims of a Mission fraud. Lewin ruled in favor of California Department of Insurance The California Department of Insurance (CDI), established in 1868, is the angency charged with overseeing the regulation of insurance regulations, enforcing statutes mandating consumer protections, educating consumers, and fostering the stability of insurance markets in the state Commissioner John Garamendi's motion that the rights of policyholders must be preferred over the rights of business interests. "In addition to triggering the recovery of $800 million for policyholders, this establishes the principle that reinsurers must first make policyholders whole before they can pursue any claims for alleged fraud," Garamendi said. State guarantee funds and policyholders in all 50 states are owed a total of $1.5 billion by Mission, said Karl Rubinstein, special counsel to the Department of Insurance. Prior to this ruling, Insurance Department lawyers recovered $700 million in settlements with reinsurers. Thus this decision, which could be appealed, would mark full recovery of outstanding claims by policyholders against Mission, Rubinstein said. In his ruling, Lewin said that to allow reinsurers to forego payment on their agreements with Mission was contrary to insurance insolvency insolvency Condition in which liabilities exceed assets so that creditors cannot be paid. It is a financial condition that often precedes bankruptcy. In the context of equity, insolvency is the inability to pay debts as they become due; insolvency under the balance-sheet law. He criticized the reinsurers for profiting for years on their contracts and then trying to distance themselves from them when Mission's demise was imminent. After a period of rapid growth, Mission Insurance, the largest property/casualty insurer to fail in U.S. history, was seized in October 1985 and ordered liquidated DAMAGES, LIQUIDATED, contracts. When the parties to a contract stipulate for the payment of a certain sum, as a satisfaction fixed and agreed upon by them, for the not doing of certain things particularly mentioned in the agreement, the sum so fixed upon is called liquidated damages. (q.v. in February 1987. Reinsurers charged faulty underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. by Mission caused its demise, while state regulators said the failure of reinsurers to honor their reinsurance contracts drove the company under. |
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