Southeastern U.S. Insurance Inc. was declared insolvent more than a month ago, but the effects of that action still are being felt by several area agencies and individuals.
Local departments like the Lumpkin County Board of Commissioners, White County Water Authority and the Jackson County Fire Fighters Association were all affected when the worker’s compensation insurance carrier was declared insolvent by the Superior Court of Fulton County on Oct. 22.
"We had to pay an additional $38,000 for two months of coverage (from a new carrier)," said Fran Sullens, Lumpkin County’s human resources director and risk manager.
"The problem that we’re having is that the cost is a hit to our budget, which is already tight, as is the budget for most counties."
Southeastern was declared insolvent because the company was unable to meet its financial obligations. The court ordered that the company’s assets be liquidated, with Georgia Insurance Commissioner John Oxendine acting as the liquidator.
Prior to the ruling, Southeastern was responsible for paying worker’s compensation claims filed with its clients. Because the company started out as a "captive" insurance company, but later became a traditional insurance company, many of its clients are left in limbo for payment of existing claims.
According to Oxendine, there are two types of captive insurance companies. One is a "single-employer captive" where a company insures itself because it is so large. The second, an "association captive," involves multiple employers.
"The Georgia Captive law was created long before I took office and it didn’t specifically give guaranteed protection to (insolvent) captive companies," said Oxendine. "Finally, about three years ago, the law was updated and captives were covered by the guarantee fund. However, it wasn’t retroactive, so the protection was only for new claims."
During that time, Southeastern was working to transition from being a captive insurance company to a traditional one — with full protection of the guarantee fund. Although Southeastern became a traditional insurance company prior to being declared insolvent, guarantee fund protection only applies to claims filed after the company made the transition.
"If we are not eligible for the insolvency pool, then the county is going to have to pay out approximately $300,000 for existing claims," Sullens said. "We’re still looking at how we’re going to pay for it, but (budget cuts, pulling from reserves) are
options that are under consideration at this point."
According to Southeastern’s Web site, individuals with claims filed after June 23, 2006, can contact the Georgia Insurer’s Insolvency Pool for assistance. Those with claims prior to that date must contact their employer to resolve their claim issues.
Repeated efforts to reach the company and its attorney were unsuccessful and messages were not returned.
The family of Kenny Whitey of Gainesville is among several individuals who are left without answers over their unpaid claims. Whitey sustained a catastrophic head injury on June 20, 2006, three days before his claim would have been protected by the guarantee fund. Because of the injury, Whitey is unable to walk, talk or care for himself and requires 24-hour care. His family estimates that his care costs around $47,000 per month, a sum they aren’t sure how they will cover now that his worker’s compensation claim has gone unpaid since Southeastern was declared insolvent.
"There are several other individuals who are not covered by the (guarantee fund) and while all the cases are important, none reach near the (financial) level of (Whitey)," said Oxendine. "If SEUS hadn’t become a traditional insurance company when it did, we would have a lot more individuals, businesses and (government agencies) that would be in a similar position without protection from the (guarantee fund)."
All in all, there are around 100 entities — boards of education, city governments, nonprofit groups and county boards of commissioners — that may not be protected by the guarantee fund.
Currently, Oxendine’s office is assessing what debts were left by Southeastern and also paying claims "to the best of its ability."
Although no charges have been filed against Southeastern, that option is not off the table.
"I have instructed the attorney general’s office, who is acting as my attorney, to give me all of the legal options available against the officers of the company or perhaps the vendors of with the company regarding civil and criminal options," Oxendine said.
"Right now we are exploring all the possibilities with everyone associated with the company. I’m not saying that anyone is being prosecuted — it’s a little early in the process, but I have instructed my attorney to give me my options."