Reciprocal Of America and The Reciprocal Group,
In Receivership For Liquidation

The Liquidation Of ROA And TRG

Question:

When did ROA and TRG enter liquidation?

Answer:

On June 20, 2003, when the State Corporation Commission of the Commonwealth of Virginia (the "Commission") entered the Order of Liquidation with a Finding of Insolvency and Directing the Cancellation of Direct Insurance Policies ("Liquidation Order").


Question:

What first prompted the Commission to make the determination that the Liquidation Order should be entered?

Answer:

The Deputy Receiver filed an Application for Orders Setting Hearing on Liquidation of ROA and TRG, Establishing Response Dates, Ordering Liquidation, Approving Claims Bar Dates, and Related Matters (the "Application") on April 30, 2003.


Question:

Why did the Deputy Receiver file the Application?

Answer:

On April 30, 2003, ROA's annual statement for the year ended December 31, 2002, was filed with the Commission’s Bureau of Insurance. That annual statement showed ROA had a deficit of approximately $209.6 million. The Deputy Receiver also found that in all probability the Companies liabilities would continue to exceed their assets by at least that amount. In fact, the ROA annual statement for the year ended December 31, 2003, showed that ROA had a deficit of approximately $468.9 million. As a result of the deficit reported in the 2002 annual statement, and for many other reasons, the Deputy Receiver determined that ROA was unable to pay all of its obligations as they came due. Consequently, the Deputy Receiver applied to the Commission for an order of liquidation and a finding of insolvency for the Companies.


Question:

What did the Application request?

Answer:

The Application requested a finding by the Commission that ROA and TRG are insolvent, an order that both be liquidated, authority for the Deputy Receiver to continue making payments to workers' compensation insureds for medical and disability claims (collectively, "Disability Claims") until such time as they would be made by the insurance guaranty associations ("GAs") in various states, and authority to cancel ROA's direct insurance policies. The Application also sought the authority for a variety of measures necessary to accomplish the liquidation and asked that the Commission set two hearings. The first hearing was the "Liquidation Hearing" conducted on June 19, 2003. The second hearing was the "Other Matters Hearing" conducted on September 17, 2003.


Question:

What occurred at the Liquidation Hearing on June 19, 2003?

Answer:

At the Liquidation Hearing, the Deputy Receiver presented testimony and exhibits regarding the Companies insolvency (including financial and actuarial data) and advised the Commission that further efforts to rehabilitate the Companies would be useless.


Question:

What was the result of the Liquidation Hearing?

Answer:

On consideration of that evidence, the Commission determined that the Companies are insolvent and that the Deputy Receiver should proceed with their liquidation. Accordingly, on June 20, 2003, the Commission entered the Liquidation Order.


Question:

What were the effects of the Commission’s Liquidation Order?

Answer:

The Liquidation Order directed the Deputy Receiver to proceed with the liquidation of the Companies. Once the Liquidation Order was entered, the GAs of all states in which ROA conducted business were triggered as described in the GUARANTY ASSOCIATIONS AND YOUR CLAIM section of the Frequently Asked Questions. The Liquidation Order also required the cancellation of ROA's direct insurance policies as is described in the CANCELLATION OF DIRECT INSURANCE POLICIES section of the Frequently Asked Questions.


Question:

What occurred at the September 17, 2003, Other Matters Hearing?

Answer:

The Deputy Receiver presented evidence regarding his proposed plan of liquidation and other measures necessary for the liquidation of the Companies, including "bar dates" by which all claims must be filed, and the Proof of Claim process through which claims must be filed.


Question:

What was the result of the September 17, 2003, Other Matters Hearing?

Answer:

The Commission (i) approved the Proof of Claim process proposed by the Deputy Receiver, and (ii) entered its Order Setting Final Bar Date and Granting Deputy Receiver Continuing Authority to Liquidate Companies which established a "Final Bar Date" of September 30, 2004. The Proof of Claim process, the Final Bar Date, the types of claims subject to the Final Bar Date, and the Claims Liquidation Date are described in the FILING A CLAIM AND THE PROOF OF CLAIM PROCESS section of the Frequently Asked Questions. The Commission also approved the Deputy Receiver’s proposed plan of liquidation.


Question:

How will the Companies be liquidated?

Answer:

Generally, the Deputy Receiver’s plan is to marshall the Companies’ assets, and then to allocate and distribute the assets among creditors in accordance with the priorities set by Virginia law. The plan also addresses the subsequent wind-down and liquidation of the Companies’ affairs. The plan is described in the Application and a summary is available at Plan of Liquidation in the Documents section of this web site.


Question:

What are the priorities for distribution of the assets?

Answer:

Priority of distribution is set by Virginia law. In general, after payment of the administrative expenses of the estate, the priorities are as follows: (1) secured claims (to the extent of the security), (2) state insurance guaranty association claims and other policyholder claims apportioned without preference, (3) taxes owed to the United States or any other debt owed which by the laws of the United States have priority, (4) wages, and (5) general creditor claims. You may want to see §38.2-1509(B)(1) of the Virginia Code for complete information.


Question:

With ROA now in liquidation, how do I know who is handling my insurance policy claim?

Answer:

When ROA was placed into liquidation, all insurance policy claims covered by GAs were sent to the GA of the state in which the injured employee resided at the time of their injury for workers’ compensation claims and of the state in which the insured entity was located for liability claims. Most of these claims are still being handled by those GAs. The applicable GA should have notified you that it is processing your claim. If a GA does not have your claim, you should contact the claims department at ROA for help in determining who is handling your claim.