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And there is no end in sight. e Frontier Rehabilita‑ tor could not state recently to an appellate court when Frontier would submit a plan of rehabilitation or be placed into liquidation.

Despite the prior court rulings, the judgment is not entitled to “full faith and credit” (that doc‑ trine apparently applies to everyone in America other than the Rehabilitator); and

What is more troublesome than the appalling delay, is that during the “rehabilitation” the Frontier Rehabili‑ tator has chosen to pay certain creditors and not other similarly‑situated creditors.

The Rehabilitator has “sole” discretion to settle claims (i.e. not subject to judicial review).

How does the Rehabilitator justify his actions? He claims that he has sole and absolute discretion to pay whatever claim he sees fit.

What has become obvious is that those who are running the Frontier Rehabilitation believe they are the Sun Kings — the Louise XVI’s — with absolute power over the policyholders.

Vol. 20, #8

December 2008

company can be “rehabilitated” through a Rehabilita‑ tion Plan and placed on its own. If rehabilitation is deemed impossible, the “rehabilitator” petitions to have the company placed in “Liquidation” — with all the statutory payment safeguards for policyholders and other creditors.

But, this is not how the current New York Rehabilita‑ tor is operating. For example, it has been more than six years since Frontier was placed in rehabilitation, but the Frontier Rehabilitator has failed to submit any “Plan of Rehabilitation.”3 Nor has Frontier been placed into Liquidation Proceedings. Nor is the Frontier “Rehabilitator” making prompt payments to policyholders. In too many cases, the modus ope‑ randi is delay, delay, delay, delay.

In doing so, the Rehabilitator ignores case law throughout the country mandating that rehabilita‑ tion plans cannot discriminate or prefer one creditor over another in the same class. See, e.g., In re Conser‑ vation of Alpine Ins. Co., 741 N.E.2d 663, 668 (Ill. App. Ct. 2000); Commercial Nat’l Bank v. Superior Court, 14 Cal. App. 4th 393, 403 (1993). In Fron‑ tier, the Rehabilitator is attempting to get around this requirement by simply ignoring the law and not sub‑ mitting any plan (and thereby running his little estate in any way he see fit).

In deciding who to pa , the Rehabilitator has unilater‑ ally mandated “negotiated” settlements reflecting Fron‑ tier’s insolvency and “poor financial condition.” But, these so‑called “negotiations” (actually arbitrary take‑it or leave‑it offers by a Rehabilitator who just happens to have “total” control over the disbursement of funds) occur in a vacuum. Indeed, without a plan or similar



company‑wide report, etc., it is impossible for one creditor to ascertain the settlements or payments — much less the payment percentages — received by other similarly‑situated creditors. So individual policyholders have no idea whether they are getting a “good” offer.

In sum, the Frontier rehabilitation is a stealth “reha‑ bilitation” being run as if it is the personal bailiwick of the Liquidation Bureau.

In one case, a policyholder obtained a judgment against Frontier — more than six years ago! e Rehabilitator refused to pay, fought the judgment, but lost before the Fifth Circuit, before the Appellate Division, First Department and before the New York Court of Appeals. e Rehabilitator still refused to pay . . . on the supposed grounds that:

Finally, the Supreme Court of the State of New York ,Appellate Division — ird Department recently aught up to the Rehabilitator and ruled that his con‑ duct in ignoring the policyholder’s judgment and the decisions of at least three courts was arbitrary and capricious. Callon Petroleum v. Superintendent of Insurance of the State of New York, as Rehabilitator of Frontier Insurance Company, Appellate Division,

  • ird Department, July 10, 2008 (Reported in Mea‑

ley’s Insurance Insolvency).

It is now four months later. Has the Rehabilitator paid? Has the Rehabilitator negotiated with the policyholder?

What do you think?

  • is is just one case and we will pursue our remedies

in the courts. What is called for here is collective ac‑

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