Quackenbush

Pursuant to the Insurance Code, Insurance Commissioner Charles Quackenbush (Commissioner) assumed responsibility for managing the insolvency of Mission Insurance Company (Mission), a defunct insurer. Mission both bought and sold reinsurance, in which the reinsured contracted with other insurance companies to exchange some of its policyholders’ premiums for indemnity against covered losses incurred by its insureds. The relevant policies provided property and casualty liability coverage if specified events occurred, as opposed to life or disability coverage. Many of the policies had “long tails,” which meant that a coverage claim from the original policyholder to its insurer, for which the original insurer would seek reimbursement from its reinsurer, such as for environmental pollution, could occur long after the triggering event (the actual dumping of pollutants, for example) and expiration of the policy. These potential, but not yet filed, coverage claims, liability for and the amount of which are unknown, are called incurred but not reported (IBNR) losses.

Over objections, the Commissioner proposed, and the trial court approved, an insolvency plan permitting him to…