The New York Liquidation Bureau said it will take steps to begin distributing assets of a property insurer that went bankrupt 22 years ago, but never paid a dime to more than 30,000 creditors.

Its Friday announcement is the latest effort by the NYLB, a private non-government agency, to dig into a backlog of work since its recent reorganization.

NYLB said it had gone to court and filed a petition and initial report on the liquidation of the Union Indemnity Insurance Company of New York, which has more than $100 million in assets. NYLB by taking that action said it hopes to pay creditors an initial distribution in the coming months.

The Supreme Court of the State of New York has signed an order permitting the Bureau to notify all creditors of its plan to pay out a distribution and setting December 18 as the hearing date to decide whether to allow a distribution.

Mark G. Peters, special deputy superintendent in charge of the NYLB, said, “These court filings will enable the court to permit distributions to creditors. The fact that Union Indemnity has been in liquidation for over 22 years without a court report or payment of dividends is completely unacceptable, but something that we are aggressively addressing. Upon approval by the court, we will begin paying distributions to Class One and Two creditors immediately.”

Union Indemnity, licensed in New York as a property and casualty insurer, was placed into liquidation on July 16, 1985 and has not paid a single distribution since that date.

Under the 1985 Liquidation Order, the bureau was charged with identifying Union Indemnity's creditors, notifying them to present their claims, marshalling Union's assets and adjudicating claims

As of March 31, there have been 31,299 claims filed against Union Indemnity and the estate had over $106 million in assets for distribution. At the hearing, the court will also decide whether to bar the presentment of new claims after Nov. 15.

NYLB noted that typically, an initial court report is filed after a company is determined to be impaired or insolvent and is placed into liquidation.

In the case of Union Indemnity, the bureau said its “troubled past,” including the indictment last December of Johanna “Jody' Hall, who formerly headed the bureau, contributed to the extensive delay in filing the court report.

The bureau's said since its new management took office April 2, it has been engaged in “an intensive reform and housecleaning effort, which includes a top-to-bottom financial audit, the revamping of procurement systems (including a new attorney panel), and the restructuring and potential privatization of various estates.”

The bureau said it will begin notifying Union Indemnity creditors that the bureau is seeking a distribution to be paid in the near future.

Recognizing that some creditors might, in their frustration at past delays, be tempted to sell their claims for less than full value, the bureau said it is advising creditors to carefully review all available information and to ascertain all of their rights before they consider any proposals offering to buy their claims.

The NYLB is a non-governmental entity, independent of the New York State Insurance Department, which carries out the responsibilities of the New York State Superintendent of Insurance in his role as receiver, and acts on his behalf to discharge his statutory duties to protect the interests of policyholders and creditors of insurance companies that have been declared impaired or insolvent.

Special Reports /

After 22 Years Bankrupt Insurer May Pay Claims

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