An article in the Wall Street Journal, “Buffett Re-Examines Reinsurance”, by Anupreeta Das and Leslie Scism (Friday, July 3, 2015), discussed Warren Buffett’s favorite way of making money – through insurance.
One of the insurance vehicles used by Berkshire Hathaway is the “retroactive reinsurance” transactions wherein it issues reinsurance to insurance companies for their asbestos, chemical and environmental claims (“long-tail liabilities) in exchange for the insurance companies’ cash reserves set aside to pay those claims to policyholders. With this “retroactive reinsurance” deal, Berkshire Hathaway receives millions of dollars in cash (the reserves) for its “float.”
Often the Berkshire Hathaway Company providing the “retroactive reinsurance” is National Indemnity Company (“NICO”). As a part of this “retroactive reinsurance” transaction, the insurance company, in addition to turning over its cash reserves, is also often required to turn over the claims handling responsibilities to NICO, who in turn has its sister company, Resolute Management Inc. (“Resolute”) begin managing the claims. Any policyholder who had historic insurance policies with CNA, AIG, Liberty Mutual, Underwriters at Lloyds, One Beacon Insurance Company, to name a few, is now dealing with a claims representative at Resolute in trying to resolve the long-tail claim. Those policyholders dealing with Resolute have been frustrated with the delays in the claims process and the coverage positions taken by Resolute. There have been several newspaper articles that discuss Resolute’s strategy of delaying and denying payment of claims, and numerous lawsuits filed against NICO and Resolute.
As a policyholder, what can you do? First, document your file for a potential claim (bad faith and/or tortious interference). How many times did you email the Resolute claims representative and not receive a response? How many times did you call the Resolute claims representative and not receive a returned call? Did you set up a conference call with other carriers and the claims representative from Resolute did not participate? Has Resolute responded to your coverage letters? Has Resolute taken positions that are not defensible? Second, if you are in an “All Sums” state (a state where the courts have ruled that a policyholder can vertically allocate its claim to the policy year of its choice), consider choosing another triggered policy year where an insurance carrier, other than one whose claims are being managed by Resolute, must provide 100% of the coverage for your claim. It then becomes that carrier’s responsibility to deal with Resolute on a contribution claim.
What has been your experience? I welcome your thoughts.