On February 8, 2012, the Pennsylvania Insurance Department (the “Department”) announced that the Pennsylvania Commonwealth Court approved its petition to liquidate First Sealord Surety Insurance.
According to the Department’s Commissioner, Michael Consedine, the Department petitioned the Commonwealth Court for a liquidation order because “First Sealord Surety is no longer able to meet its policyholder obligations or pay its debts as they come due.”
First Sealord Surety Insurance began its operations in 1991 as a mono-line insurance company underwriting surety bonds. The firm insured construction general contractors and subcontractors against loss. Until recently, when it stopped writing bonds, First Sealord Surety Insurance offered coverage in 39 states.
This liquidation order triggers the following process:
- The Department, as liquidator, takes over, and secures the company and marshals all available assets to pay policyholder claims.
- On-site liquidator analyzes the company’s most recent financial data to understand the full scope of the company’s financial deficit.
- Policies (bonds) terminate within 30 business days of the liquidation order.
- Policyholders/bondholders are among the first priority of payments and will receive notice of that payment process shortly.
- Creditors are also paid in order of priority and follow a proof of claims process.
- The liquidator distributes any surplus funds to the shareholders.
- The company is then formally dissolved.
In light of the Commonwealth Court’s order liquidating First Sealord Surety Insurance, contractors and owners should review their bonds in order to determine who issued them, and take appropriate actions if the bonds were issued by First Sealord Surety Insurance, because, inter alia, bonds issued by First Sealord Surety Insurance will be terminated.