Insurance

Sonnenschein is one of the leading providers of legal services to the insurance industry.  Sonnenschein's Corporate Reorganization & Bankruptcy Practice Group, together with the firm's Insurance, Corporate and other practice groups, is highly experienced in handling bankruptcy, workout and insolvency matters related to insurance companies and insurance coverage.  Our knowledge of the industry and thorough understanding of its special concerns and needs helps us to consistently generate cost-effective results for our clients.

Sonnenschein has handled workout, reorganization and insolvency and bankruptcy matters for a wide variety of insurance and reinsurance clients.  Much of our experience in these areas cannot be neatly categorized as either "workout" or "bankruptcy" related.  Indeed, one of the hallmarks of our practice has been an acute awareness of the overlap and the importance of offering experience and expertise in both workouts and bankruptcies in order to provide maximum flexibility and achieve the most effective results.

Our practice groups adopt a team approach to meeting client needs.  Attorneys from different groups work together to identify practical solutions and to utilize all applicable legal tools in connection with insurance company restructurings across the nation, and in connection with international and cross-border insolvency issues.

Representative Clients

• Affiliated FM
• Allianz
• Allied Products, Inc.
• Allstate Insurance Company
• Appalachian Insurance Company
• AXA Belgium
• Centre Reinsurance Company
• Commerce Bank of Australia
• Country Insurance & Financial Group
• Employers Reinsurance Corporation
• Fireman's Fund
• Folksamerica Reinsurance Company
• Frontier Insurance Company
• GE Capital
• General Accident Insurance Company of America
• Government of the Republic of Korea
• Liberty Mutual Insurance Company
• National Workers Compensation Reinsurance Pool
• National Organization of Life & Health Insurance Guaranty Associations (NOLHGA)
• New York Life Insurance Company
• The Prudential Insurance Company of America
• SCAN Health Plan
• The St. Paul Travelers Companies, Inc.
• Western United Life Assurance Company
• XL Insurance

Representative Engagements

The following is a summary of certain of the matters in which we have been actively involved for the party or parties noted in the descriptive text and that are of a public nature.  There are also representations in non-public matters that are not discussed by name herein. 

Corporate Transactions and Restructuring

Pacific Standard Life Ins. Co. Rehabilitation: 
Sonnenschein represented the National Organization of Life & Health Insurance Guaranty Associations (NOLHGA) in connection with the development of an alternative rehabilitation plan (as a counter to the rehabilitation plan developed by the state insurance commissioner) for Pacific Standard Life Insurance Company.  Our plan was subsequently adopted by the court and the assets and liabilities were restructured and subsequently sold to Hartford Life.

Hawaiian Ins. Group Restructuring: 
When the insurance subsidiaries of the Hawaiian Insurance Group were significantly impaired by losses associated with hurricane Iniki, Sonnenschein assisted its parent corporation, Hawaiian Electric Company, in connection with developing a plan to restructure the company and create a good insurer / bad insurer structure so that the insurer could continue to issue new insurance policies while running off its Iniki losses.

Reliance Ins. Co. and Kemper Ins. Co.: 
In connection with the insolvency of Reliance and the potential insolvency of Kemper Insurance Company, Sonnenschein lawyers have been advising large policyholders on how to manage their risks in connection with policies issued by these insolvent and troubled insurers.

Mutual Benefit Life Ins. Co.: 
We also were retained to represent the life insurance industry in the three-year rehabilitation of Mutual Benefit Life Insurance Company, the largest U.S. insurer ever to fail.  Our New York corporate and litigation lawyers worked together to structure policyholder coverage guarantees by the industry and successfully argued in favor of these guarantees in New Jersey state court.  This matter, the largest insurance company insolvency to date, has raised numerous cross-border litigation issues that Sonnenschein has been called upon to consider.  In addition, we served as counsel to a consortium of insurance companies, led by Prudential and Metropolitan Life, that has played a major role in negotiating the Mutual Benefit rehabilitation.

The Equitable Life Assurance Society Financings: 
Among our financing engagements for insurance companies, The Equitable Life Assurance Society of the U.S. retained us in connection with its $111 million sale of subordinated debt and equity securities to a Nomura-backed Delaware business trust.  This sale was the second phase of a transaction between the same parties.  Sonnenschein also represented various affiliates of The Equitable in a restructuring of its subordinated debt investment in the audio and video tape manufacturing subsidiaries of Ampex Corporation.  As part of the transaction, our clients acquired most of the common stock of the holding company of these subsidiaries, which comprises one of the leading makers of professional audio and video tapes in the United States.

Acquisitions: 
Our work on insurance company acquisitions and restructurings also has included representing Transamerica Corporation in connection with all aspects of the disposition of its property/casualty subsidiary.  We also have represented France's Axa-Midi Assurance in its efforts to obtain the approval of the Illinois Director of Insurance for Axa-Midi's proposed acquisition of Farmers Insurance, and Country Mutual Company in connection with its acquisition of a mutual insurance company in Oregon and its assumption of the business of its wholly-owned stock insurance subsidiary, Country Preferred Insurance Company.

Sonnenschein regularly represents a group of insurance and financial companies in acquisitions, including:

• a financially challenged publicly-traded life insurance company and an acquisition of effective control of an affiliated mutual insurance company;
• a financially troubled property & casualty and life insurance group and the granting of a security interest in proceeds from the sale of control in the troubled insurance group;
• a surplus note of a financially troubled property & casualty insurance group and acquisition of effective control of its board of directors; and
• a surplus note of a financially troubled property & casualty insurance group and the subsequent acquisition of effective control of the board of directors of the target insurance company group.

Other Key Corporate Counseling Engagements: 
Our corporate work in the insurance area includes counseling insurance companies on restructurings, acquisitions, agent contracts, policy revisions, claims practices, and many other matters.  Sonnenschein provides legal advice to the Country Companies Insurance Group on all major corporate and financial decisions.  On behalf of Allstate Insurance Company, we have been involved in general corporate and other matters, including lending transactions, employment and employee benefits matters, regulatory questions, and the $2.4 billion initial public offering of its stock.

Our work also has included representation of companies in connection with their diversification into the insurance field, including the creation of captive insurance companies and the establishment of insurance subsidiaries for non-insurance companies.  In addition, Sonnenschein has negotiated complex insurance and reinsurance agreements on behalf of both insurers and insureds.  Our lawyers have handled extensive work for fraternal insurance companies (including Aid Association for Lutherans, one of the largest insurers in the country) and for national trade groups (including the National Fraternal Congress).  This work often has centered on tax problems and associated securities issues affecting these insurers' qualification as fraternals.

We regularly represent senior lenders, subordinated lenders and equity interests in connection with opinions concerning complex financial structures as well as representation in out of court restructurings, foreclosures and remedies and in Chapter 11 cases.  Institutional investors we represent on a regular basis in such matters include Archon (a Goldman Sachs affiliate), GE Capital and Prudential.  We represented New York Life on the creditors committee in the LTV Steel I and frequently represent creditors committees including representations of the Official Committees in United Airlines, Wickes Lumber and Federal-Mogul Corp.  We have extensive experience with commercial, insurance, hotel, health care and residential real estate collateral, as well as a wide variety of tangible and intangible personal property collateral.  

State Law Insolvencies and Receiverships

We have been deeply involved in many of the largest insurance company insolvencies, which involve a state law receivership, conservatorship, liquidation or similar proceeding, sometimes in conjunction with a bankruptcy case or insolvency proceedings in other jurisdictions.  There are significant differences between these kinds of proceedings and cases under the United States Bankruptcy Code.  There also are often important jurisdictional issues, especially when a series of related entities are being reorganized or liquidated in several different legal forums. 

Government Representations: 
By way of example, our lawyers have represented: the State of Rhode Island as reinsurance counsel in connection with several of its liquidations; the Government of the Republic of Korea in its efforts to sell seven of Korea's insolvent life insurance companies; the Superintendent of Insurance of the State of New York in the rehabilitation of Frontier Insurance Company; the Insurance Commissioner of the State of California in his capacity as liquidator of the Superior National Group of Insurance Companies;  the estate trust officer for the Superior National Group of Insurance Companies (as outside general counsel); an ancillary receiver concerning the Fremont Indemnity Insurance Company liquidation; and the Commissioner of West Virginia as rehabilitator and liquidator for Quality Insurance Company.  Other work in this area has included representation of a reinsurance pool in connection with the collection of a large receivable from another member of the pool.

State Insurance Receiverships: 
Sonnenschein lawyers represent insurers and reinsurers in litigation and arbitration matters involving all aspects of state insurance receiverships including allocation issues, avoidance issues, classification of losses in and payments to insolvencies.  We provide representation in the structuring of transactions with troubled insurers, and frequently represent state insurance receivers in conservation, rehabilitation and liquidation matters.  Our lawyers have represented reinsurers in almost every major liquidation in the United States over the last twenty years and also have in-house insurance receivership expertise.

State Guaranty Associations: 
Sonnenschein played a primary role in some of the most significant insurance insolvencies of the past decade.  We were retained to represent the National Organization of Life & Health Insurance Guaranty Associations (NOLHGA) in its involvement with the insolvency of Confederation Life Insurance Company, a Canadian life insurer with policyholder liabilities in the U.S. and Canada of $9 billion.  NOLHGA represents the interests of state guaranty associations that cover shortfalls to policyholders when insurers fail.  We have advised NOLHGA, generally, on all aspects of the insolvency, including unique cross-border litigation issues.  We also were retained by the trustees of the three liquidating trusts established under the plan of rehabilitation of Executive Life Insurance Company.  Assets in the trusts nominally total more than $1 billion.  Sonnenschein has also represented NOLHGA in connection with a number of other insurance insolvencies, including Summit National Life, National American Life and EBL Life. 

Reinsurer Issues: 
Our experience includes representation of ceding and assuming reinsurers in the handling of setoff issues and commutations in connection with troubled insurers.  Such representations have involved Mutual Fire Insurance Company, Transit Insurance Company, National Colonial Insurance Company, and Reliance Insurance Company.  Our lawyers are adept at litigating and arbitrating contested issues and structuring transactions with distressed insurers.  By way of example, in this capacity Sonnenschein has represented Centre Reinsurance Company, XL Insurance, Employers Reinsurance Corporation, Hannover Re, Swiss Re, London Life Insurance Company and Folksamerica Reinsurance Company.  Sonnenschein lawyers also have represented corporate policyholders such as ADP Total Source Inc., Lennox Industries and Johnson & Johnson in a variety of policyholder issues related to insolvent insurers.

Mass Torts, Coverage Actions, and Disputes with Bankruptcy Estates

A number of large entities have filed bankruptcy in the past few years to address an overwhelming number of asbestos, tort or similar types of claims.  These proceedings often involve a variety of different types of insurance coverage and layers of insurers over a wide range of time periods.  They also involve an intersection of bankruptcy courts handling certain issues with litigation, arbitration or mediation of claims in other forums, as well as certain appeal and other bonds.

Asbestos and Silica Litigation Cases: 
Sonnenschein is one of the leading firms in the area of mass tort insolvencies, including asbestos and silica cases.  For example, we successfully represented General Accident Insurance Company of America in both civil litigation and bankruptcy proceedings related to coverage for its asbestos liability.  During the course of proceedings, the courts issued hundreds of pages of opinions, including the published decision in General Accident Ins. Co. of America v. Superior Court, 55 Cal. App. 4th 1444 (Ct. App. 1997), which helped to define the law in California with respect to corporate insurance successorship liability.  Sonnenschein's representation of General Accident included a month-long plan confirmation trial in In re Western Asbestos.

Sonnenschein also played a significant role in one of the leading cases applying Bankruptcy Code Section 524(g) in a state law coverage action.  Sonnenschein represented one of the insurers at trial and in the Court of Appeal in Fuller-Austin Insulation Company v. Highlands Insurance Company.  As a debtor in bankruptcy, Fuller-Austin obtained approval of a Chapter 11 plan that included a 524(g) settlement trust.  In a state court coverage action, Fuller-Austin sought to use the bankruptcy confirmation proceedings as an adjudication of liability for state law insurance purposes.  The California Court of Appeal held that the confirmation proceedings were not an "actual trial" establishing Fuller-Austin's liability for purposes of California insurance law and that the bankruptcy proceedings could not accelerate an insurer's contractual obligations and grant the debtor greater rights under its policies than it had prior to bankruptcy.  The decision is reported at Fuller-Austin Insulation Company v. Highlands Insurance Company, 135 Cal. App. 4th 958 (Ct. App. 2006). 

Other Key Engagements: 
Our representation of Allstate Insurance Company in connection with the Celotex bankruptcy case led to the United States Supreme Court recognizing the power of bankruptcy courts to enjoin plaintiffs from obtaining funds from a debtor's surety. 

We currently represent the Official Committee of Unsecured Creditors in the Federal-Mogul Corp. case and have represented insurers in other major cases such as Armstrong World Industries, Babcock & Wilcox, Combustion Engineering, Flintkote, Kaiser Aluminum, Mid-Valley (Dresser), Owens-Corning, UNR Industries, U.S. Brass, USG (second case), and Congoleum, among others.

Sonnenschein also represents insurers in the three major church bankruptcies:  Archdiocese of Portland and Dioceses of Tucson and Spokane.

APX Holdings, LLC (Los Angeles, California): 
In this chapter 7 case, a member of our practice served as counsel to the workers' compensation, general liability and auto insurance carrier to trucking company in connection with the allowance of administrative expenses for insurance coverage. We also addressed the ability to arbitrate the dispute regarding the allowed amount of the administrative expense. 

Steakhouse Partners, Inc. (Riverside, California):
In this chapter 11 case, a member of our firm represented an insurer in connection with the allowance of claims and a dispute regarding whether the insurer is over collateralized, and violated automatic stay.

Pleasant Care Corporation (Los Angeles, California): 
In this chapter 11 case, a member of our firm was counsel to a workers' compensation insurer in connection with the allowance of prepetition and administrative expense claims.  This case also involved a dispute regarding whether the insurer is over collateralized and properly estimated future losses. 

Coastal Employers, Inc. (Santa Ana, California): 
A member of our firm represented a worker compensation insurer for temporary staffing and PEO in connection with allowance of a claim, the sale of businesses, the appointment of an examiner, conversion of cases, and a dispute regarding whether the insurer is over-collateralized.

Sonnenschein lawyers are adept at handling a variety of other insurance-related bankruptcy issues, including continuing coverage and renewals, retrospective premiums, letters of credit draws, policy defenses and attempts by committees or other parties to assert claims on the insured's behalf.