G Insurance Alert March 2002 Reliance Checklist By Adam S. Cantor, Esq. I n October 2001, the Pennsylvania Insurance form. If you are filing a new claim, you must also Department placed Reliance Insurance attach documentation in support of the claim. Company into liquidation after concluding that it was insolvent by more than $1 billion and would Q: Can I secure coverage today against run out of cash to pay claims before the start of future claims not yet made? 2002. This action created the largest insurance insolvency ever seen in the United States. A: If you have any “occurrence”-based policies with Reliance, you should file a What does all of this mean for Reliance “contingent claim.” A contingent claim is insureds? Our “Reliance Checklist” gives answers one that is unknown at this time but may to some of the most commonly asked questions. arise under the policy at a later date. File a proof of claim; but, in the space for Q: I’m a Reliance policyholder (or a third Amount of Claim, simply indicate party claimant) with an existing claim; what “unknown”. must I do to protect my rights to Reliance policy benefits? Q: I have multiple Reliance policies that may address a specific claim. Do I file only A: File a Proof of Claim form with the one proof of claim? Statutory Liquidator of Reliance Insurance Company. Call 215.864.4000 for a copy or A: No. For maximum protection, file a download it from the Pennsylvania separate proof of claim under each policy Insurance Department website, period for which Reliance provided www.insurance.state.pa.us. A separate proof coverage. of claim must be filed for each claim that you have. Q: Are there any special considerations with respect to excess policies? Failure to file a proof of claim may result in a claim denial. THE DEADLINE FOR FILING A: If a claim on your underlying policy(s) CLAIMS IS DECEMBER 31, 2003, 5:00 p.m. EST. is now approaching the Reliance attachment point (e.g., having an incurred If you filed a claim with Reliance before its value in excess of 75% of underlying limits) liquidation, you still must file the proof of claim you should file a proof of claim. An excess This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. L Roseland, New Jersey Telephone 973.597.2500 65 Livingston Avenue www.lowenstein.com 07068-1791 Fax 973.597.2400 G policyholder may also file a contingent Q: Reliance canceled my policy mid-year, claim. but after I paid the full annual premium. What are my options? Q: Give me the real scoop: Is my Reliance policy worthless? A: All Reliance policies were terminated on November 2, 2001. If you paid for A: No. Although Reliance is insolvent, it coverage past that date, you should file a has significant assets, including proof of claim for the unearned premium. reinsurance, which the Statutory Liquidator acts to collect. It is anticipated that there Q: Do I have recourse today against will be distributions to claimants, although Reliance, via a lawsuit? the amounts are not yet known and it is expected to be at least several years before A: No. The Order of Liquidation blocks all any payments are made. persons from instituting or continuing any legal proceedings against Reliance. Q: So, then how will I get my claims paid? For more information regarding this or any other A: First, look to the insurance guaranty insurance issue, please contact Robert D. Chesler, association/guaranty fund (“Fund”) of the Chair of the Insurance Law Practice Group, at state in which the insured is domiciled or 973.597.2328 or at firstname.lastname@example.org, or you the insured risk is located. may also contact Adam S. Cantor, Associate of the Insurance Law Practice Group, at 973.597.6326 or at The Statutory Liquidator will forward your email@example.com. proof of claim to the appropriate Fund. Most Fund’s attempt to begin payments within 90 days of the liquidation, but the actual waiting period from the time of claim submission varies. Insurance guaranty funds have caps on the amount payable for an individual claim. The caps differ from state to state. In New Jersey, the cap is $300,000 per claim. Claims which are not covered by an insurance guaranty association or portions of claims which exceed the statutory coverage limits of a Fund become claims against the estate of Reliance and will be paid at some time in the future to the extent funds are available.