Introducing... The Insurance Bartender

A bartender (also known as a barkeep, barman, barmaid, bar chef, tapster, mixologist, alcohol server, flairman or an alcohol chef) is a person who formulates and serves alcoholic or soft drink beverages behind the bar. However, throughout time, bartenders have also functioned as dispensers of knowledge, taking on the roles of therapists, advocates, professors, and philosophers. In a past life (college), I was fortunate enough to play the very diverse role of bartender. Today, I find that I am routinely called upon distribute knowledge, buy/dispense cocktails, and take on the role of insurance professor, philosopher or advocate.

It is for this reason in which my column and blog will now be titled “Insurance Bartender”. I plan to use this platform to dispense advice and take requests from “patrons” on what issues I should tackle in my next column or post. I will also preview the topic(s) to be covered in the next edition of insurance bartender in a section titled “On Tap”. (Thanks Mallory for the idea) As always, please don’t hesitate to Email me at [email protected] or call 608-256-4429 to submit a question or suggestion.

This week’s thirst for knowledge request comes from Mike in Hartland. Mike asked, “If an insurance company who was offering a dividend to their policyholders goes out of business (sells or goes insolvent) who is responsible for paying those dividends? Are there any guarantees in regard to a dividend? Would the Guarantee fund of the state in which the insured is domiciled pay? Would the company acquiring the new company be responsible?

Great question Mike. To help answer this question, I brought in a guest bartender, Steve Junior, Deputy Director of the Bureau of Financial Analysis and Examinations for the Office of the Commissioner of Insurance to help answer this perplexing question.

Workers’ compensation insurers compete through service quality and building a record of generous and reliable policyholder dividends. Policyholder dividends cannot be conditioned on renewal of the policy by the employer nor guaranteed to the policyholder by the insurer.

 If, however, the dividend was formally declared by the board of directors and recorded as a liability on the books of the insurance corporation at the time the company became insolvent, then the policyholder could file a proof of claim with the insurance corporation’s receiver. The insurance corporation’s receiver is almost never the same person as the bankruptcy trustee of the holding company that owns the insurance corporation, so it is important to take care to make an inquiry of the right person. 

If an internet search turns up nothing or is inconclusive as to whom the receiver is, then one should seek this information from the state of domicile of the insolvent insurance corporation. This will normally be classified as a general or residual claim, which ranks below loss claims and unearned premiums in the order of priority. The receiver will not pay a claim for a dividend unless and until either all losses and unearned premium claims are paid in full or unless and until the receiver is confident that there are sufficient funds to meet obligations that are higher in the order of priority. 

This typically takes a number of years into the receivership if it occurs at all. Most claims this low in the order of priority are never paid. The policyholder should not expect to ever be paid any dividend and should count himself lucky if he is even repaid his unearned premium in full. However, if the policyholder wants any chance at all of being paid anything eventually, the policyholder will have to check with the receiver and obtain the appropriate proof of claim form and file it before the bar date established by the court supervising the receivership. It is in discussion with the receiver’s staff that one could be informed that there were either no dividends declared by the board or that the receiver clawed back the dividend declaration because it was too close to the date of the insurer’s insolvency, in which case, it would not be worth filing a claim.

ON TAP

In the next edition of Insurance Bartender, I will take a shot (pun intended) at tackling a question from Megan in Middleton on whether lenders can legally withhold the processing of an escrow payment, and in this situation, if the lender hasn’t received what they consider evidence of insurance.