Bedivere Insurance Company Placed in Liquidation in Pennsylvaniashoke2013
Corporate Successor to OneBeacon, Commercial Union, Employers Fire, et al.
The Bedivere Insurance Company, f/k/a OneBeacon Insurance Company, Commercial Union Insurance Company, et al. (collectively “Bedivere”) was placed into liquidation by the Pennsylvania Commonwealth Court on March 11, 2021, following a Petition for Liquidation filed by the Insurance Commissioner of the Commonwealth of Pennsylvania. All claims and litigation against Bedivere and its subsidiaries are stayed during the liquidation process. Bedivere’s predecessor companies historically wrote General Liability, Workers’ Compensation and auto coverage, but had ceased issuing new coverage ten or more years ago.
Bedivere’s corporate history is tortured and complex. In December 2020, the Pennsylvania Insurance Department approved the merger of The Employers Fire Insurance Company, Lamorak Insurance Company, and Potomac Insurance Company into the Bedivere Insurance Company. Lamorak was formerly known as OneBeacon America Insurance Company, Commercial Union Insurance Company, and Employers Commercial Union Insurance Company. Bedivere’s liabilities include OneBeacon’s and Commercial Union’s historic “long-tail” asbestos and environmental obligations.
Bedivere Financials: The Liquidation Petition indicates that a $24.2M prejudgment interest award to Olin Corp. earlier this year against Lamorak (f/k/a Commercial Union) was the final catalyst for the Liquidation Petition. Lamorak was the last remaining defendant in a long-pending coverage matter in which it had settled its environmental risk with Olin for a reported $120M in 2018.
Bedivere last reported a profit in 2016. It reported a net loss of $283M in 2020 after reporting a net loss of $83M in 2019. Its policyholder surplus for year-end 2020 was negative $277M, down from $35.4M in net income just a year earlier. The decline appears to primarily be because of a $283.4M net loss that Bedivere attributed mostly to approximately $290M in unfavorable development in its asbestos and environmental reserves for prior years. Potomac Insurance was Bedivere’s affiliated reinsurer, and it is our understanding that it previously ceded a large portion of its asbestos, environmental and other long-tail exposures to National Indemnity Co. (“NICO”, part of the Berkshire Hathaway Inc. family, which also includes Resolute Management Inc.). Potomac reportedly was among Berkshires largest coverage assumptions. It is our understanding that Potomac commuted its agreement with NICO in 2019, although it has been reported that a Berkshire entity may have continued to provide some coverage to Bedivere as of year-end 2020.
Claims Process: All claims pending against Bedivere, and its progeny, are stayed and must now be pursued with and through the Liquidator. The Liquidation Order establishes a December 31, 2021 Bar Date deadline for policyholders to submit Proof of Claim forms (“POC”). A POC is required regardless of whether a claim has already been submitted to Bedivere. The Liquidator establishes the process by which claims must be submitted, how it will evaluate, and how they ultimately will be valued. The Liquidator will develop rules and procedures such as: 1) how and whether Incurred But Not Reported claims (“IBNR”) and future claims will be valued; 2) how to allocate “long-tail” asbestos and environmental risks vis-a-vis other solvent and insolvent insurers whose coverage also is implicated; 3) whether the Liquidation will reduce claims valuation based on the expectancy of contribution claim recoveries from other insurers; 4) how it discounts claims in the context of pollution and asbestos exclusions; and 5) the level of documentation and proof required to substantiate a “long-tail” claim. There is no uniformity among other liquidations in the U.S. and U.K. schemes of arrangement with respect to these and other issues, which typically have a significant impact on “long-tail” policyholder recovery. In order to pursue and sustain a claim it is necessary that policyholders file a POC before the December 31, 2021 Bar Date. It is expected that the Liquidation will take many years to complete, especially given the complicated corporate history and the pursuit of reinsurance recoveries. Based on past experience, it is likely that policyholders that desire to monetize their claims during the process will have opportunities to assign their claims to third-party entities for a discounted amount of their ultimate claims value.
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The Hoke LLC team has been representing clients in “long-tail” insurance recovery matters for over thirty years. It has obtained impressive results in policyholder recovery from U.S. liquidation and U.K. scheme of arrangement proceedings. It secured the largest and fourth largest policyholder recoveries from Integrity in Liquidation and a claim it filed against Home Insurance Company in Liquidation recently was valued at $32M. It has obtained significant liquidation recoveries for asbestos, environmental and products risks for many Fortune 500 companies and other public and non-public entities.