ULLICO Casualty Company Rehabilitation: Policyholders Beware

May 08, 2013

Ullico Casualty Company was placed into rehabilitation proceedings by the Delaware Insurance Commissioner on March 11, 2013. Insureds under Ullico Casualty Company’s large deductible workers' compensation programs should exercise caution and evaluate their alternatives. Because of the proceedings, the fate of posted collateral and the administration of the large deductible programs may be in doubt as the rehabilitation moves forward. If a liquidation is triggered, state guaranty associations may have control over claims paying, and the liquidator may attempt to assert control over collateral that has been posted.

An injunction has been put in place by the Rehabilitation Court barring any actions against the Company. Indemnity and medical payments on workers' compensation policies are currently being made, but payments under other types of policy are not being made. Several state insurance departments have also restricted or prohibited the company from doing business in their states. Persons having any property of Ullico Casualty are enjoined from transacting any business with those assets and must submit an accounting.

The Rehabilitator will decide in the coming weeks whether or not to place the company in liquidation and turn the claims over to the state guaranty associations. Ullico Casualty’s policies have not been cancelled, but are likely to be cancelled if the company enters liquidation proceedings.

Ullico Casualty grew very rapidly over the last five years, and losses had begun to mount. The Company reports negative policyholder surplus of approximately $52 million on its annual statement.

A very substantial portion of Ullico Casualty’s business was written through managing general agents and over 90% is administered by third party administrators. Ullico Casualty wrote workers' compensation, fidelity/surety, fiduciary liability, professional liability, commercial automobile and commercial multi-peril insurance. The workers' compensation programs are both large deductible and guaranteed cost. The company entered and left a number of lines of business. Among its programs were public livery and residential contractors. Ullico Casualty also participated in a number of fronting arrangements, notably with State National Insurance Company and Hudson Insurance Company. Ullico Casualty will continue to administer the fronted policies in the rehabilitation, and most TPAs are still in place. More than half of Ullico Casualty’s premium was written in New York and California, but it also did substantial business in Illinois, New Jersey, Pennsylvania, Connecticut, Florida, Texas and Minnesota.

Ullico Casualty Company is a subsidiary of Ullico, Inc., but the parent and other subsidiaries are not subject to the rehabilitation proceeding.

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This article was originally published by Bingham McCutchen LLP.