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The Home, NCCI give ground
to settle residual market tab
NEW YORK-A settlement last week between The Home Insurance Co. and the National Council on Compensation Insurance over residual workers compensation payments will result in the NCCI getting much less than it expected but also in The Home paying more than it previously offered.
Last week, The Home announced a deal with the NCCI, its biggest creditor, that will save the defunct insurer nearly $100 million.
The Home will pay $60 million to settle with the NCCI, which is more than the $40 million it offered to pay earlier this year but considerably less than the payment in full the NCCI demanded in May.
The NCCI also could receive an additional $70 million from The Home's reinsurer, Centre Reinsurance Dublin, but not for more than 40 years and only if The Home runs out of assets to pay claims.
The negotiations between the NCCI and The Home began last year, when The Home offered to settle its obligation to the NCCI residual market workers compensation pool for about $72.9 million-or about half the discounted value of its total obligation. The NCCI turned down that offer but said it would consider accepting $130 million. Then, in March, The Home lowered its offer to $40 million after the publication of its financial results revealed worse-than-expected losses and that the insurer was nearly $552 million short of its risk-based capital requirements (BI, April 28).
In May, the NCCI wrote to The Home, demanding the total payment of its obligation to the pool (BI, May 12).
Later that month, the NCCI filed suit in New York seeking the payment. Negotiations then began between the insurer and the NCCI that resulted in last week's settlement.
The settlement should push The Home's statutory surplus back over $100 million, said David Nichols, the examiner appointed by the New Hampshire Insurance Department to oversee the runoff of The Home. At the end of the first quarter, The Home's surplus had fallen to $30 million, and the accounts included a provision for a larger payment to the NCCI than that to which the sides finally agreed.
The settlement was in the best interests of The Home and the NCCI as it will help keep The Home solvent, Mr. Nichols said. If The Home's surplus had dropped below zero, it would have been taken into receivership, and the NCCI likely would have received nothing, he said.
The settlement probably was the best the NCCI could hope for, but it highlights the problem of liability restructuring, said Peter A. Lefkin, vp government and industry affairs at Fireman's Fund Insurance Co. in Washington, which holds a seat on the NCCI board.
Hudson uninsured for recall
ROGERS, Ark.-Hudson Foods Co. does not have product recall insurance to cover the costs of its voluntary recall last week of 40,000 pounds of frozen ground beef patties it fears may be contaminated with a deadly strain of E. coli bacteria.
But late Friday, the U.S. Department of Agriculture expanded the hamburger recall to 1.2 million pounds because of new evidence of possible contamination with the deadly bacteria.
Twenty thousand pounds of the Hudson meat went to supermarkets in 33 states; the other 20,000 pounds were shipped to fast food restaurants, a spokesman from the Department of Agriculture said Friday.
Hudson Foods does not carry product recall insurance, said Kent Doss, director of risk management and human resources. A unit of Old Republic General Insurance Group is its general liability insurer.
At the end of last week, Hudson foods had "no basis to file a claim" under its liability policy, Mr. Doss said.
Most of the initial recall centered in Colorado, said David Siemens, Hudson's director of investor relations, where bacteria was first found in the burgers.
The frozen hamburgers came from one plant in Columbus, Neb., and were produced in three days at the beginning of June, the company said. Officials at Rogers, Ark.-based Hudson, which had $1.4 billion in sales in 1996, mostly from its chicken, turkey and beef products, said the financial loss from the recall is negligible, though last week they did not know the amount.
Last month, a worker in a Denver supermarket suspected Hudson Foods' frozen hamburgers had made him ill, said Dr. Richard Hoffman, chief epidemiologist for the State of Colorado.
Neither Dr. Hoffman nor Mr. Doss of Hudson Foods could explain how the E. coli H7 bacteria, which lives in cows' intestines, got mixed into the hamburger.
Burger King Corp. of Miami announced last week it would participate in the recall. More than 1,200 hundred of its restaurants had received frozen hamburger patties from the same plant, a spokeswoman for Burger King said. However, Burger King bought meat produced on a separate line from that of the patties found with E. coli.
Flood toll estimate rises
FORT COLLINS, Colo.-Flood waters caused significantly more damage than first thought at Colorado State University, and preliminary estimates indicate repairs may cost as much as $135 million.
A spokesman for the university in Fort Collins said the extent of damage from last month's storm that caused Spring Creek to flood its banks is becoming clearer as cleanup progresses. Current estimates put property damage at $100 million to $135 million, he said.
The university is sorting out who among private insurers and a state self-insurance fund will pay damages, the spokesman said.
The state has $25 million in flood coverage with a $5 million primary layer written by National Union Fire Insurance Co. of Pittsburgh, Pa., and excess layers totaling $20 million written by Reliance Insurance Co. and Fireman's Fund Insurance Co. (BI, Aug. 4).
Damage to the school accounted for most of the commercial property damage in the area, while the flooding also soaked hundreds of cars and homes. Most businesses and residences in the area did not carry flood insurance, according to the National Flood Insurance Program.
Plaintiff loses implant suit
SANTA ROSA, Calif.-A Superior Court jury in Santa Rosa, Calif., last week returned a verdict in favor of defendants Bristol-Myers Squibb Co. and Medical Engineering Corp. in a case involving a ruptured silicone breast implant.
In her suit, Deborah Sterling, a breast cancer patient, claimed a ruptured silicone breast implant had contributed to her contracting a serious immune system disorder.
However, the jury of nine women and three men rejected her claims for strict liability, fraud and negligence.
Meanwhile, in New Orleans, a jury began deliberations Friday in the first implant class-action suit to go to trial against Dow Chemical Co. The trial, in which women are seeking damages for illnesses related to the silicone implants they received, began March 27.
The implants were manufactured by now-bankrupt Dow Corning Inc., a joint venture of Dow Chemical and Corning Inc. The suit claims Dow Chemical is liable because it allegedly tested silicone compounds in its laboratories for the joint venture and withheld evidence that they could be harmful.
Filing requirements eased
WASHINGTON-A provision in tax legislation exempting employers from filing certain benefit forms with the Labor Department will go into effect retroactively, the department says.
Effective Aug. 5, the day President Clinton signed into law the Taxpayer Relief Act of 1997, employers no longer have to file copies of summary plan descriptions and summaries of material modifications with the Labor Department.
The elimination of that requirement will save employers about $2.5 million annually, the department estimates.
The department said last week that employers should immediately cease filing SPDs and SMMs with the department, even if an event triggering a filing occurred before Aug. 5.
Take the case of an employer that significantly overhauled its pension plan on July 1. Even though the event occurred before Aug. 5, filing an SMM-normally due within 210 days after the close of the plan year-would not be required with the department.
The new federal law, though, does not relieve employers of their obligation to provide copies of SPDs and SMMs to plan participants and to the Labor Department if the department requests the documents.
The Antigua government has struck Tangent Insurance Co. Ltd. and Westwood Insurance Co. Ltd. from its register of international business corporations. Gary Pigot, an official with Tangent manager Sussex Insurance Group in Barbados, said he was unaware of the May 7 government action and that Tangent has continued to operate (BI, Feb. 24). Westwood, capitalized with worthless World War II-era Philippine notes, closed its U.S. management office last year (BI, Aug. 12, 1996). . . .A petition has been filed with California's 4th Appellate District court in Santa Ana, Calif., seeking a rehearing of its decision in Michael J. Marks vs. Loral, in which it says companies can replace older, higher-paid employees with younger, lower-paid workers for economic reasons without violating age discrimination laws. . . .Lawrence R. Hoehne has pleaded guilty to a mail fraud charge connected to his operation of the bogus Trelawney Insurances Ltd. of Ireland (BI, June 23). Mr. Hoehne is scheduled for sentencing Oct. 20 and faces a maximum of five years in prison. . . .Hannover Reinsurance Co. has commuted its reinsurance agreements with the Bermuda liquidators of Electric Mutual Liability Insurance Co. Terms were not disclosed. The commutation follows similar EMLICO deals with General Re Corp. units and Allstate Insurance Co. . . .Florida lawmakers will hear from small business interests, attorneys and others during tort reform hearings being set for the last four months of the year. Legislators expect to draft new laws related to the tort system as it affects small business in the state. . . .A U.S. District Court judge in the District of Columbia has certified two sets of class-action claims alleging age discrimination against Charlotte, N.C.-based First Union Corp. The class consists of former employees of First American Bank, who were over 40 when they lost their jobs during the period May 1993 and December 1994 after First Union bought the Washington-area bank and its subsidiaries. The second class consists of job applicants over 40 who were not hired by First Union during the same period. First Union denies any wrongdoing. The trial is expected to begin later this year. . . . Los Angeles city officials have identified twice the amount of Northridge Earthquake-related sewer line damage as originally estimated. The findings will require another $53 million in repairs added to the $147 million already being paid for by the Federal Emergency Management Agency. . . .A jury in Texas has ruled that a 60 Minutes broadcast from 1995 was truthful and three plaintiffs could not collect damages in their libel suit. The three plaintiffs, a developer and two owners, claimed the broadcast dealing with housing developments along the Mexican border damaged their reputation. . . .National Diagnostics Inc., a Brandon, Fla.-based medical imaging company, is in discussions with the NASDAQ exchange about whether it continues to meet NASDAQ listing requirements as a result of its investment in stock of Equisure Inc. The American Stock Exchange suspended trading in Equisure stock Aug. 4 amid an investigation of Equisure's accounting practices and possible manipulation of its stock by insiders (BI, Aug. 11). If Equisure stock proves valueless, National Diagnostics' shareholders equity may no longer meet NASDAQ listing requirements, Mr. Hult said.