Reinsurance Focus

The case involved a dispute over a $10.6 million deposit that Superior National Insurance Company (“SNIC”) made with the Oregon Department of Consumer and Business Services (“DCBS”). The Court was asked to decide whether DCBS could use SNIC’s deposit to satisfy the statutory liabilities of an insolvent insurer, Commercial Compensation Casualty Company (“CCCC”). SNIC was a retrocessionaire of CCCC, and both SNIC and CCCC were under the common control of a parent holding company, Superior National Insurance Group (“Superior National”).

The court first concluded that a retrocessionaire was a “reinsurer” for purposes of the insurance code, making its statutory deposits subject to control by DCBS. Despite this, the court held that SNIC was not liable for all of CCCC’s losses since, under the pooling agreement, SNIC only agreed to pay for 22% of the losses and expenses of the pooled business.

The court next concluded that SNIC and CCCC were “operationally a single company for all practical purposes,” and held that Superior National caused CCCC to violate the Insurance Code by failing to make the required deposit. Because SNIC and CCCC were under the common control of Superior National and because Superior National took actions to evade government regulation, the Oregon Supreme Court held that the requirements for corporate veil piercing were met. As such, the Court ordered Superior National to reimburse the Oregon Insurance Guaranty Association for payments made on behalf of CCCC. Oregon Insurance Guaranty Association v. Superior National Insurance Company, No. 00C-18554, (Or. Nov. 29, 2007).

This post written by Lynn Hawkins.