NCIGA 2020 Annual Report

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Report of NCIGA CounselIn the past year, the Association’s involvement in casesrelated to the bar date and statute of repose provisions of theGuaranty Act has continued. In the case of Booth v. Hackney,the North Carolina Court of Appeals issued an Opiniondated April 7, 2020, affirming the dismissal of the Associationfrom proceedings before the Industrial Commission basedupon application of the plain language of the bar date andstatute of repose provisions. The Plaintiff has filed a Petitionfor Discretionary Review with the North Carolina SupremeCourt, which the Association has opposed. The Associationexpects a decision from the North Carolina Supreme Courton the Petition for Discretionary review before the end of2020. Until a final decision on that Petition for DiscretionaryReview, other workers compensation cases pending at theIndustrial Commission in which the bar date and statute ofrepose have been raised as a bar to claim payments by theAssociation will remain stayed.The past year has also seen the Association continue its effortsto pursue recoveries from policyholders who purchasedworkers compensation policies from insolvent insurers thatwere written subject to large deductibles. On such claims,the Association is obligated to pay the covered claim fromthe first dollar, but then is entitled to seek recovery fromthe policyholder of any covered claim payments within theamounts of the large deductible. In some of these cases, theAssociation has been able to achieve amicable resolutionsof the Association’s claims. In others, particularly thoserelated to the insolvency of Guarantee Insurance Company,the Association has elected to allow the receiver to pursuerecoveries on behalf of the Association. In other cases, thepolicyholders have raised legal defenses to the Association’sclaims which will require court resolution. One case involvedan insured of Freestone Insurance Company known asAccuForce Smart Solutions (“AccuForce”), a Tennessee-basedstaffing company. In an Opinion dated November 5, 2019,the North Carolina Court of Appeals affirmed a summaryjudgment granted in favor of the Association. AccuForcehas filed a Petition for Discretionary Review with the NorthCarolina Supreme Court which the Association has opposed.The Association expects a decision from the North CarolinaSupreme Court on the Petition for Discretionary reviewbefore the end of 2020. The Association will continue toactively pursue its rights to seek recoveries from these largedeductible policyholders.The Association is also actively pursuing recoveries fromother solvent insurance companies under the nonduplicationof recovery provisions of the Guaranty Act. In a numberof recent insolvencies of workers compensation insurers,insureds that are temporary staffing companies often haveoverlapping policies with multiple insurers. In addition, thereare “special employers” who also have separate coverage thatmay be applicable to a claim. In these cases, the Associationinvestigates whether these coverages are required to beexhausted, and whether these other solvent insurers can bepursued as an additional source of obtaining recovery ofclaim payments made by the Association.In the past year, the Association has monitored litigationin California between the California Insurance GuaranteeAssociation (“CIGA”) and the Centers for Medicare andMedicaid Services (“CMS”). In CIGA v. Azar, 940 F.3d 1061(9th Cir. 2019), the federal Ninth Circuit Court of Appealsheld that CIGA was not a “primary plan” under the MedicareSecondary Payer Act, and that CIGA has no obligation toreimburse the Government for conditional payments theGovernment makes to Medicare beneficiaries. Based uponthe decision in Azar, CIGA recently received confirmationfrom CMS that CIGA was no longer required to meetSection 111 reporting requirements for payments made byCIGA. Since the Association is similarly situated to CIGAas a statutory association that provides limited benefits as alast resort upon the insolvency of an insurer, the Associationhas sent a letter to CMS asking for the same relief that hasbeen granted to CIGA. The Association is hopeful that theseissues can be resolved amicably with CMS without the needto pursue litigation.Finally, the Association has continued to focus on legalissues arising from insolvent insurer estates, working withdomiciliary receivers on expense and reinsurance claimaudits, large deductible recoveries, and early access payments.In the past year, the Association saw the final closing of thedomiciliary estate proceeding for CAGC Insurance Company(“CAGC”). As a result of the closing of the CAGC insolvency,the Association received its share of the distribution ofthe remaining assets of CAGC and assumed the ongoingobligation to bill directly excess insurers for remaining CAGCclaims. As the receivers of other insolvent insurer estatesmake claim priority determinations for different categoriesof claims in those estates, the Association will defend itsinterests, as necessary, to ensure that the Association receivesthe maximum recovery on its claims against each of theseinsolvent insurer estates.The Association and counsel remain proactive in monitoringevents and developments that may impact the Association.Christopher J. BlakePartner, Nelson Mullins Riley& Scarborough LLPJoseph W. EasonPartner, Nelson Mullins Riley& Scarborough LLP32020 Annual Report
Managing Secretary’s ReportRay EvansManaging Secretary, IGAWhen the NCIGA, NCRF, & NCRB preparedour plans for 2020, including projects wewould undertake, budgets we would adhereto, training we would do and goals we wouldachieve, little did we know that three monthsinto the year, everything would go upsidedown. For years, the organizations have hada disaster recovery/business continuity planthat would be updated and modified, butnever did it include the possibility that a localhealth official could keep us from workingat the office. During the first few days ofMarch when such an event appeared to bea possibility, we spent the week of March 8,planning, buying equipment, and reviewing our processes, but ready or not onMarch 13, it appeared that quarantine was the future. With a huge effort fromour IS folks, and the cooperation of all of our associates, by March 17, we hadmorphed from 100% work at the office to 100% work from home.Many months have passed since we made this change, and we remain successfullyworking from home. In fact, because of the number of associates that are insusceptible classes and others who have children in school, not to mentiontravel restrictions in place for members of our committees and boards, we arecurrently not planning much activity in the office until January. However, weare prepared with PPE, entry testing, social distancing protocols, and plexiglasspartitions in the lobby, meeting rooms and other spaces so that whenever wedecide to return significant numbers of associates to the office, we can do itsafely. We will not rush as the safety of our associates is most important.There are four keys to the Guaranty Association being able to work remotely:• We have great associates, managers and supervisors. I also have a talented,engaged, energetic, and focused senior staff, who will add more color to thestory later in this report,• We worked for years to acquire a sophisticated electronic environmentto carry out our responsibilities, and, by using a VPN, we can work froma home station that looks just like the one we were using in the office,including all of the security protections of the office,• We have also worked regularly to install and keep current a processenvironment with training and education for all of our associates,• And, we are regularly communicating with associates at a number of differentlevels. For now, gone are the times that we could just grab someone for an adhoc meeting. Meeting agendas, details, and emails, especially those that haveoutside attendees, have tightened and become more precise so that attendeesare better informed. Chairs of these meetings, who are doing a wonderful jobfor us, are also adhering to announced meeting times, hopefully reducing“Zoom fatigue.” Together, all of this has resulted in better attendance, moreconstructive conversation, and more productive meetings. As an interestingfactoid, we now average 27,000 meeting minutes on Zoom each week.This adds up to executing successfully our responsibilities to fulfill theobligations embedded in the purpose of NCGS §58-48-5, to provide amechanism for the payment of covered claims, to avoid excessive delay inpayment, to avoid financial loss to claimants because of the insolvency ofan insurer, and to provide a mechanism to assess the cost of this protectionamong insurers.But, to help us fulfill these obligations each year requires more specific goalsand objectives. The following pages will have much more detail, but here arethe goals and objectives for 2020 which I am confident we will have achievedat year end:• Maintain the “fire house” to enable a quick and effective response to futureinsolvencies, which requires a sophisticated electronic environment and aprocess environment.• Manage the budget that has been approved by the Board.• Manage reserves so that there will be sufficient monies to pay currentclaims as they mature.• Recover all monies owed to the Guaranty Association, which now meansreimbursement from receivers and collection from large deductible and networth insureds.• Maintain precise records as reporting to receivers, regulators, and othergovernment entities is vital to recovery efforts.• Manage litigation, as we have 8-10 individual litigation cases in playconstantly.• And, be a “player” in the broader Guaranty Fund community byparticipating in a variety of insurance industry and related activities.This has been a different year, and I believe many of the ways we worked priorto 2020 will not be the same in 2021 and beyond. Although I have lost theauthor, I read many years ago that, “There are too many people praying formountains of difficulty to be removed, when what they really need is courageto climb them.” We still need the prayers, but our folks have demonstrated thatcollectively we have the courage, skill, and experience to continue to excel atwhat we do.And, this year, needed more than ever, behind our associates is a largenumber of carrier employees, consultants, and attorneys that are helpingguide our committees, providing invaluable consulting and legal advice andcontinued accessibility.A special thanks to Allen Houck for his counsel as we have navigated throughthis year.NC Insurance Guaranty Association4
Page 1 and 2: NCIGA2020 Annual ReportNorth Caroli
Page 3: Message from the ChairmanAllen Houc
Page 7 and 8: Balance SheetYear Ending August 31,
Page 9 and 10: Claims Paid DetailClaims Reserved D
Page 11 and 12: FinanceEdith DavisChief Financial O

NCIGA 2020 Annual Report

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