The Bedivere Liquidation – What Matters for Policyholders?

April 06, 2021

The Bedivere Insurance Company, formerly known as OneBeacon Insurance Company, was placed into liquidation on March 11, 2021.  Once writing commercial, workers’ compensation, and automobile liability insurance policies nationwide, the company had stopped writing most new or renewal business over a decade ago.  As a Pennsylvania-domiciled insurance company, the Pennsylvania Commonwealth Court will oversee the Bedivere liquidation.

Bedivere’s liquidation follows the Pennsylvania Insurance Department’s December 2020 approval of the merger of The Employers Fire Insurance Company, Lamorak Insurance Company, and Potomac Insurance Company with and into the Bedivere Insurance Company.  Lamorak was formerly known as OneBeacon American Insurance Company, Commercial Union Insurance Company, and Employers Commercial Union Insurance Company.  Among other liabilities, Bedivere holds the other historic environmental and asbestos liability coverage obligations under certain policies issued by OneBeacon and Commercial Union.  Claims under an insurance policy issued by any of those entities are now subject to the liquidation proceeding in Pennsylvania.

Policyholder Claims

Under the Liquidation Order, policyholder pursuit of recoveries against Bedivere’s assets, through litigation or otherwise, is stayed and such claims are required to be addressed with the Liquidator.  The Liquidation Order establishes a December 31, 2021 deadline for policyholders to submit Proof of Claim forms, along with information supporting their claims in order to preserve their rights to receive any distribution of Bedivere’s assets.  A Proof of Claim form must be filed even if a claim has previously been submitted to Bedivere.

Claims will be adjusted through processes established in the liquidation.  The Liquidator will concurrently marshal assets, including through reinsurance collections, to pay claims in the priority and amounts permitted by statute and as approved by the Pennsylvania Commonwealth Court.  Bedivere’s notice to policyholders advises that “it will be several years before all Bedivere assets are collected and distribution amounts can be determined.”

Analysis

The standard advice provided by law firms that represent policyholders is to timely file a Proof of Claim Form by the applicable deadline in order to preserve any right to participate in a distribution of assets.  That applies here and Gilbert LLP will file and vigorously purse those claims, as it has in other cases.

But the playing field on which those claims will be evaluated, adjusted, valued, and potentially paid is going to be shaped separate and apart from any submission of an individual Proof of Claim.  Among other issues, the potential for recovery for many policyholders will be impacted by, among other things:

  • The nature of the documentation required to establish a claim’s value;
  • Whether and how liabilities that are pending, but unresolved, as of the date of the Proof of Claim will be valued for purposes of determining a claim’s value; and
  • Whether and how future, but not yet incurred, policyholder liabilities will be considered.

These issues are particularly significant for policyholders with “long-tail” and mass tort liabilities, where losses will continue to accrue after the submission of a Proof of Claim form that would be covered by Bedivere insurance policies in the ordinary course, absent a liquidation proceeding.  Insurer liquidations in various states and in the United Kingdom have addressed these questions differently, often with influence from policyholders and their counsel.

The timing by which insurer liquidations are administered and within which distributions are made to policyholders also warrants advocacy and improvement.  Although there has been variation in the timing by which policyholder claims have been valued and paid in U.S. insurer liquidations, the potential for a prolonged administration and significant delay in any distribution of Bedivere’s assets is substantial.  Other significant U.S. insurer liquidation proceedings, including those of Midland Insurance Company (liquidation commenced in 1986) and Home Insurance Company (liquidation commenced in 2003), among others, have lasted for decades.  These estates continue to have unresolved policyholder claims and have yet to establish a final payment percentage.  Policyholders and their counsel can and should have a role in shaping a process that provides for an efficient and fair resolution of claims and a distribution of Bedivere’s assets that does not require policyholders to wait decades to receive the benefits of their policies.

Lastly, the apparently rapid deterioration of Bedivere’s finances and its placement into liquidation raises certain questions.  For instance, just last year, the Pennsylvania Insurance Department approved the merger of The Employer’s Fire Insurance Company, Lamorak Insurance Company, and Potomac Insurance Company with and into Bedivere Insurance Company.  What impact, if any, did this merger have on the prospects for Bedivere to remain solvent?  What analysis was done regarding the prospects for Bedivere to pay claims in the future (in seeking approval for a 2014 transaction, regulators were presented with an analysis indicating a 93.6% likelihood that the run-off OneBeacon entities, now a part of Bedivere, would be able to satisfy policyholder claims for the next 30 years) and was considered in evaluating the merger?  If, as reported, a recent adverse result in the long-pending Olin coverage litigation was the breaking point regarding Bedivere’s solvency, what assumptions were made by Bedivere and its management regarding the potential for an adverse outcome in that case and how was it accounted for in managing Bedivere’s reserves and capitalization?  How have policyholder claims submitted and pressed for payment in the years preceding the liquidation been handled?  Were they timely paid?  Ignored?  Delayed?

Further investigation of all of these questions, and others, is warranted in order to assess the ultimate issue:  What will ultimately be paid for policyholder claims submitted in Bedivere’s liquidation proceeding?