SPIRIT COMMERCIAL AUTO RISK RETENTION GROUP, INC., IN RECEIVERSHIP

 

FREQUENTLY ASKED QUESTIONS AND ANSWERS

Below are frequently asked questions and answers (“FAQs”) for the receivership of Spirit Commercial Auto Risk Retention Group, Inc. (hereinafter, “Spirit” or the “Company”).  These FAQs are meant as a general guide, and you should feel free to contact Spirit receivership staff, at the address or telephone mentioned in question and answer twelve below, if you have further questions.

More information and important receivership documents may be found at the receivership web site at www.SpiritInsure.com.

Question 1:    WHAT IS THE STATUS OF THE COMPANY?

Answer:          On January 18, 2019, in a case styled State of Nevada ex rel. Commissioner of Insurance, in her Official Capacity as Statutory Receiver for Delinquent Domestic Insurer v. Spirit Commercial Auto Risk Retention Group, Inc., a Nevada Domiciled Association Captive Insurance Company, Case No. A-19-787325-C, Dept. No. XVI, the Eighth Judicial District Court of Nevada (“Receivership Court”) issued its Order Appointing Insurance Commissioner, Barbara D. Richardson (the “Commissioner”), as Temporary Receiver Pending Further Orders of the Court and Granting Temporary Injunctive Relief Pursuant to NRS 696B.270, which appointed the Commissioner as Temporary Receiver for Spirit.

Further, on February 27, 2019, Department XXVII of the Eighth Judicial District Court of Nevada entered its Permanent Injunction and Order Appointing Commissioner as Permanent Receiver of Spirit Commercial Auto Risk Retention Group, Inc. (the “Permanent Order”).  Pursuant to the terms of the Permanent Order, the Commissioner was appointed Permanent Receiver (“Receiver”), and the firm of Cantilo & Bennett, L.L.P. was that same day appointed by the Receiver as Special Deputy Receiver of Spirit.  As provided by the Permanent Order, the Receiver and Special Deputy Receiver are authorized to conduct the business of the Company and to administer its affairs for the protection of all secured creditors, insureds, policyholders, and general creditors.

 

Question 2:    WHY WAS IT NECESSARY TO PLACE SPIRIT IN RECEIVERSHIP?

Answer:          The Court found Spirit to be in an insolvent and hazardous financial condition that required the appointment of a Receiver and Special Deputy Receiver to administer the affairs of the Company for the protection of its insureds, policyholders, creditors, and the general public.  

 

Question 3:    WHAT DOES RECEIVERSHIP MEAN?

Answer:          Receivership is a protective measure established under Nevada insurance law whereby regulatory officials seize control of an insurance company that is in an insolvent and hazardous financial condition.  Receivership action is taken (as is the case for Spirit) for the protection of its policyholders, creditors, and the general public.  The Receiver and Special Deputy Receiver, through the Permanent Order, have been given the authority to run the affairs of Spirit in compliance with applicable Court orders and the laws of the state of Nevada.

 

Question 4:     IS SPIRIT ISSUING NEW INSURANCE POLICIES?

Answer:          No.  The Court’s Permanent Order placing Spirit into receivership permanently enjoins the Company from writing any new business.  Further, the authority to issue new business was surrendered voluntarily by Spirit in connection with prior regulatory actions which took place in 2018, and Spirit stopped writing new and renewal insurance business on June 30, 2018.

Not only is Spirit not issuing any new policies, but the Company’s in-force insurance policies were canceled by order of the Receivership Court, effective on the earlier of April 15, 2019, or the date when the insured ceased making premium payments to Spirit (and insurance coverage on active policies is provided through April 15, 2019, provided that premiums are paid by insureds to the Company through such date).  INSUREDS MUST OBTAIN NEW INSURANCE POLICY COVERAGE WITH A DIFFERENT COMPANY ON AND AFTER APRIL 16, 2019.

 

Question 5:     WHAT IS THE STATUS OF MY PENDING CLAIM FILED WITH SPIRIT?

Answer:         The Receiver has elected, as permitted by paragraph 17 of the Permanent Order, to impose a full suspension and moratorium on disbursements owed by Spirit, to include the payment of insurance claims, insurance defense costs, mediation costs, and other such costs related to the defense or adjudication of insurance policy claims. This moratorium is effective as of the date of entry of the Permanent Order, February 27, 2019.

All claims against Spirit will be handled as claims against the Spirit receivership estate, and all proceedings are governed by applicable Nevada law.  All claims must be submitted on the approved Proof of Claim Form.  This means that if you have a claim against Spirit, even if you have already submitted it to Spirit’s third-party claims administrator or to the Special Deputy Receiver, you must file a Proof of Claim Form and follow the Receiver’s claim procedure to have your claim considered for payment by the receivership estate.  The Proof of Claim procedure has not yet been established, but once it has been approved by the Receivership Court it will be available for download at www.SpiritInsure.com.  The Receiver will also mail notice of the approved claim process to all interested parties of Spirit—to confirm you are on this mailing list, please contact (512) 478-6000.

If a lawsuit is pending against you, you should make arrangements as best you can for the defense of claims brought against you as an insured of Spirit—the Receiver cannot at this time pay defense costs for Spirit insureds.  This means that you are responsible for your own defense.  Insureds that pay their own defense costs for claims covered by the Company and/or pay money to settle claims covered by a Spirit policy, are entitled to submit claims for those paid defense costs or claim settlements (i.e., as covered by Spirit’s insurance policy) to the Receiver.

The Receiver cannot guarantee the full reimbursement of defense costs and claim payments made directly by insureds.  We cannot estimate when such reimbursement payments, if any, will be made.  This will depend on the extent of any future distributions made by the Receiver, including a review and determination by the Receiver that the paid costs and claims are in fact covered by a Spirit insurance policy.

 

Question 6:    IS THERE GUARANTY FUND COVERAGE FOR SPIRIT CLAIMS?

Answer:          No.  There is no guaranty fund coverage, as Risk Retention Groups are excluded from the Nevada Insurance Guaranty Association by law, as provided by NRS 695E.200(5).  Risk retention groups, such as Spirit, are also not covered by the state insurance guaranty associations of other state jurisdictions.  Pursuant to Nevada Revised Statute 695E.180, Spirit policies contained the following notice:

 

“This policy is issued by a Risk Retention Group.  This Risk Retention Group may not be subject to all of the insurance laws and regulations in your State.  This Risk Retention Group is not covered by, nor are you protected under, any State insurance insolvency guaranty fund.”

 

Question 6a: IS THERE REINSURANCE COVERAGE FOR MY CLAIM AGAINST SPIRIT?

There is no reinsurance coverage that would be directly available to individual policyholders for their claims, and reinsurance recoveries (if any) would go to the general assets of the estate.

Question 7:     HOW DO I PRESENT CLAIMS THAT I HAVE UNDER A SPIRIT POLICY?

Answer:          All claims against Spirit will be handled as claims against the Spirit receivership estate, and all proceedings are governed by applicable Nevada law.  All claims must be submitted on the approved Proof of Claim Form.  This means that if you have a claim against Spirit, even if you have already submitted it to Spirit’s third-party claims administrator or to the Special Deputy Receiver, you must file a Proof of Claim Form and follow the Receiver’s claim procedure to have your claim considered for payment by the receivership estate.  The Proof of Claim Form and procedure has not yet been established, but once it has been approved by the Receivership Court it will be available for download at www.SpiritInsure.com.  The Receiver will also mail notice of the approved claim process to all interested parties of Spirit—to confirm you are on this mailing list, please contact (512) 478-6000.

 

Question 8:    DOES THE PERMANENT ORDER OF RECEIVERSHIP CANCEL SPIRIT’S INSURANCE POLICIES?

Answer:          Yes.  Paragraph 18 of the Permanent Order mandates that “all evidences of coverage, insurance policies and contracts of insurance of SCARRG[Spirit] are hereby terminated effective on April 15, 2019, unless the Receiver determines that any such contracts should be cancelled as of an earlier date.”  Spirit’s in-force insurance policies were canceled effective on the earlier of April 15, 2019, or the date when the insured ceased making premium payments to Spirit (and insurance coverage on active policies is provided through April 15, 2019, provided premiums are paid by insureds to the Company through such date).

INSUREDS MUST OBTAIN NEW INSURANCE POLICY COVERAGE WITH A DIFFERENT COMPANY ON AND AFTER APRIL 16, 2019.

 

Question 9:     IF AN INSURED TOOK OVER THE DEFENSE OF A CLAIM COVERED BY HIS OR HER INSURANCE POLICY AFTER SPIRIT WAS PLACED IN RECEIVERSHIP AND HAS PAID, OR IS PAYING, HIS OR HER OWN LEGAL COSTS, WILL THE INSURED BE REIMBURSED FOR THOSE COSTS BY THE RECEIVERSHIP ESTATE?

Answer:          Generally, when legal costs are incurred in defending a claim that is covered by a Spirit insurance policy, the cost will be considered an insurance policy benefit claim, provided that the insurance policy provides coverage for insurance defense costs.  You should submit a claim for the defense cost to the Receiver via the receivership claim procedure, including the Proof of Claim Form.  All such defense cost claims are subject to the moratorium on claim payments imposed by the Receiver for the protection of all of Spirit’s insureds, creditors, and the public.

The Receiver provides no guaranty of reimbursement of defense costs and claim payments made directly by insureds, or the timing of any reimbursement payment that may be approved, as this will depend on the extent of any future distributions made by the Receiver, including a review and approval that paid costs and claims are covered by Spirit’s insurance policy.

If a lawsuit is pending against you, you should make arrangements as best you can for the defense of claims brought against you as an insured of Spirit—the Receiver cannot at this time pay defense costs for Spirit insureds.  This means that you are responsible for your own defense.  Insureds that pay their own defense costs for claims covered by the Company and/or pay money to settle claims covered by a Spirit policy, are entitled to submit claims for those paid defense costs or claim settlements (i.e., as covered by Spirit’s insurance policy) to the Receiver.

 

Question 10:   IS THERE AN INJUNCTION FROM COMMENCING, BRINGING, MAINTAINING, OR FURTHER PROSECUTING ANY ACTION AT LAW, SUIT IN EQUITY, ARBITRATION, OR SPECIAL OR OTHER PROCEEDING AGAINST THE COMPANIES, RECEIVER, OR SPECIAL DEPUTY RECEIVER?

Answer:          Yes, the Permanent Order of receivership provides that all persons are enjoined from commencing, bringing, maintaining, or further prosecuting any action at law, suit in equity, arbitration, or special or other proceeding against Spirit, the Receiver, or the Special Deputy Receiver, unless brought in the Receivership Court.                                Please note that this injunction does not apply to suits against Spirit policyholders.

 

Question 11:   WHEN WILL CLAIMS BE PAID?

Answer:          We are unable to advise you at this time how soon claims will be evaluated and paid, but this is a priority for the receivership team.

It is not yet certain whether there will be enough assets to pay all classes of claims in full.  Also, no claim will be processed or paid unless a Proof of Claim Form has been submitted to the Receiver for that claim.  The Proof of Claim Form and procedure has not yet been established, but once it has been approved by the Receivership Court it will be available for download at www.SpiritInsure.com.  The Receiver will also mail notice of the approved claim process to all interested parties of Spirit—to confirm you are on this mailing list, please contact (512) 478-6000.

Claims will only be paid subject to the approval of the Receivership Court, and subject to the availability of assets in the estate.

Any questions regarding this receivership or the affairs of Spirit may be directed to (512) 478-6000.

 

Question 12:   HOW CAN I CONTACT RECEIVERSHIP STAFF DIRECTLY?  IS THERE A RECEIVERSHIP WEB SITE?

Answer:          For copies of documents, additional information, and to address receivership questions, contact the Special Deputy Receiver as follows:

 

Cantilo & Bennett, L.L.P.

Special Deputy Receiver

Spirit Commercial Auto Risk Retention Group, Inc.

11401 Century Oaks Terrace, Suite 300

Austin, Texas  78758

(512) 478-6000

Important notices and court filings will be posted to this web site under the “Receivership Documents” section.  You may wish to check the site regularly to stay informed about the status of Spirit.