SPIRIT COMMERCIAL AUTO RISK RETENTION GROUP, INC., IN RECEIVERSHIP FAQ

SPIRIT COMMERCIAL AUTO RISK RETENTION GROUP, INC., IN RECEIVERSHIP

FREQUENTLY ASKED QUESTIONS AND ANSWERS

Below are frequently asked questions and answers (“FAQs”) for the receivership of Spirit Commercial Auto Risk Retention Group, Inc. (hereinafter, “Spirit” or the “Company”). These FAQs are meant as a general guide, and you should feel free to contact Spirit receivership staff if you have further questions.

Click here! to jump to the Proof of Claim FAQ’s.

Question 1: WHAT IS THE STATUS OF THE COMPANY?

Answer:

Effective November 6, 2019, Spirit is in receivership for liquidation. Court documents referenced below may be found under the Receivership Documents section of this web site. The case number for the receivership proceedings is Case No. A-19-787325-B.

The Final Order Placing Spirit into Liquidation (the “Liquidation Order”) was entered on November 6, 2019, by Department XXVII of the Eighth Judicial District Court of Clark County, Nevada (the “Receivership Court”). The Receivership Court also entered its Final Order Setting Claims Filing Deadline for Spirit and Related Relief (the “Claims Order”) on November 6, 2019. The Orders resulted from the Receiver’s filing of a Consolidated Motion for a Final Order Placing Spirit into Liquidation, and for an Order Setting a Claims Filing Deadline, and Granting Related Relief.

The Liquidation Order directs the Receiver to liquidate and wind down the affairs of Spirit. The Claims Order approves a proof of claim process for filing claims against Spirit and establishes a Claims Filing Deadline for the submission of such claims.

The Receivership Court has established May 31, 2021, as the Claims Filing Deadline for the submission of claims against Spirit. An earlier Claims Filing Deadline was extended by order of the Receivership Court (see Order here)

Prior to being placed into liquidation, the Receivership Court had ordered Spirit into temporary receivership on January 18, 2019, which was then made permanent on February 27, 2019, by the Receivership Court’s Permanent Injunction and Order Appointing Commissioner as Permanent Receiver of Spirit Commercial Auto Risk Retention Group, Inc. (the “Permanent Order”). Pursuant to the terms of the Permanent Order, the Commissioner was appointed Permanent Receiver (“Receiver”), and the firm of Cantilo & Bennett, L.L.P. was that same day appointed by the Receiver as Special Deputy Receiver (“SDR”) of Spirit. As provided by the Permanent Order, the Receiver and SDR are authorized to conduct the business of the Company and to administer its affairs for the protection of all secured creditors, insureds, policyholders, and general creditors. The authority granted to the Receiver and her deputies by the Permanent Order continues into Spirit’s liquidation.

Question 2: WHY WAS IT NECESSARY TO PLACE SPIRIT IN RECEIVERSHIP, AND LIQUIDATION?

Answer: The Court found Spirit to be in an insolvent and hazardous financial condition that required the appointment of a Receiver and SDR to administer the affairs of the Company for the protection of its insureds, policyholders, creditors, and the general public (the “interested parties” of Spirit).

The Receiver determined that there was good cause for Spirit to be liquidated, that a rehabilitation would not be feasible, and that any delay could further harm the interested parties of Spirit.

Further information about these matters can be found in the Receiver’s quarterly status reports filed in the Receivership Court, which are available for download on this web site.

Question 3: WHAT DOES RECEIVERSHIP MEAN; and WHAT IS THE DIFFERENCE BETWEEN A LIQUIDATION AND A REHABILITATION RECEIVERSHIP?

Answer:

Receivership is a protective measure established under Nevada insurance law whereby regulatory officials seize control of an insurance company that is in an insolvent and hazardous financial condition. Receivership action is taken (as is the case for Spirit) for the protection of its policyholders, creditors, and the general public. The Receiver and SDR, through the Permanent Order, have been given the authority to run the affairs of Spirit in compliance with applicable Court orders and the laws of the state of Nevada.

In a rehabilitation (a.k.a. “conservation”) receivership, business continues with the Receiver’s supervision as the Receiver attempts to return the Company to a financially sound condition. When a company is placed in liquidation receivership, the Receiver is directed to dissolve the company, wind down its affairs, and distribute its assets to its policyholders and creditors. Spirit is now in liquidation.

Question 4: IS SPIRIT ISSUING NEW INSURANCE POLICIES?

Answer: No. The Court’s Permanent Order placing Spirit into receivership permanently enjoined the Company from writing any new business. Further, the authority to issue new business was surrendered voluntarily by Spirit in connection with prior regulatory actions which took place in 2018, and Spirit stopped writing new and renewal insurance business on June 30, 2018. The permanent injunctions of the Permanent Order follow Spirit into its Liquidation. That is, Spirit is not now, and will never again be, allowed to write new business.

Not only is Spirit not issuing any new policies, but the Company’s in-force insurance policies were canceled by order of the Receivership Court, effective on the earlier of April 15, 2019, or the date when the insured ceased making premium payments to Spirit. Insurance coverage on active policies is provided through April 15, 2019, provided that premiums are paid by insureds to the Company through such date. INSUREDS MUST OBTAIN NEW INSURANCE POLICY COVERAGE WITH A DIFFERENT COMPANY ON AND AFTER APRIL 16, 2019.

Question 5: WHAT IS THE STATUS OF MY PENDING CLAIM FILED WITH SPIRIT?

Answer: The Receiver has elected, as permitted by paragraph 17 of the Permanent Order, to impose a full suspension and moratorium on disbursements owed by Spirit, to include the payment of insurance claims, insurance defense costs, mediation costs, and other such costs related to the defense or adjudication of insurance policy claims. This moratorium is effective as of the date of entry of the Permanent Order, February 27, 2019. All claims against Spirit will be handled as claims against the Spirit receivership estate, and all proceedings are governed by applicable Nevada law. All claims must be submitted on the approved Proof of Claim (“POC”) Form. This means that if you have a claim against Spirit, even if you have already submitted it to Spirit’s third-party claims administrator or to the SDR, you must file a POC Form and follow the Receiver’s claim procedure to have your claim considered for payment by the receivership estate. The court-approved Receivership Claims and Appeals Procedure and the POC form are available for download on this web site. The Receiver will also mail notice of the approved claim process to all interested parties of Spirit.

If a lawsuit is pending against you, you should make arrangements as best you can for the defense of claims brought against you as an insured of Spirit. The Receiver cannot at this time pay defense costs for Spirit insureds. This means that you are responsible for your own defense. Insureds that pay their own defense costs for claims covered by the Company and/or pay money to settle claims covered by a Spirit policy, are entitled to submit claims for those paid defense costs or claim settlements (i.e., as covered by Spirit’s insurance policy) to the Receiver.

The Receiver cannot guarantee the full reimbursement of defense costs and claim payments made directly by insureds and cannot estimate when such reimbursement payments, if any, will be made. This will depend on the extent of any future distributions made by the Receiver, including a review and determination by the Receiver that the paid costs and claims are in fact covered by a Spirit insurance policy.

Question 6: IS THERE GUARANTY FUND COVERAGE FOR SPIRIT CLAIMS?

Answer: No. There is no guaranty fund coverage, as Risk Retention Groups are excluded from the Nevada Insurance Guaranty Association by law, as provided by NRS 695E.200(5). Risk retention groups, such as Spirit, are also not covered by the state insurance guaranty associations of other state jurisdictions. Pursuant to Nevada Revised Statute 695E.180, Spirit policies contained the following notice:

“This policy is issued by a Risk Retention Group. This Risk Retention Group may not be subject to all of the insurance laws and regulations in your State. This Risk Retention Group is not covered by, nor are you protected under, any State insurance insolvency guaranty fund.”

Question 6a: IS THERE REINSURANCE COVERAGE FOR MY CLAIM AGAINST SPIRIT?

There is no reinsurance coverage that would be directly available to individual policyholders for their claims, and reinsurance recoveries (if any) would go to the general assets of the estate.

Question 7: HOW DO I PRESENT CLAIMS THAT I HAVE UNDER A SPIRIT POLICY?

Answer: All claims against Spirit will be handled as claims against the Spirit receivership estate, and all proceedings are governed by applicable Nevada law. All claims must be submitted on the approved POC Form. This means that if you have a claim against Spirit, even if you have already submitted it to Spirit’s third-party claims administrator or to the SDR, you must file a POC Form and follow the Receiver’s claim procedure to have your claim considered for payment by the receivership estate. The court-approved Receivership Claims and Appeals Procedure and the POC Form are available for download on this web site. The Receiver will also mail notice of the approved claim process to all interested parties of Spirit.

Question 8: DOES THE PERMANENT ORDER OF RECEIVERSHIP CANCEL SPIRIT’S INSURANCE POLICIES?

Answer: Yes. Paragraph 18 of the Permanent Order mandates that “all evidences of coverage, insurance policies and contracts of insurance of SCARRG[Spirit] are hereby terminated effective on April 15, 2019, unless the Receiver determines that any such contracts should be cancelled as of an earlier date.” Spirit’s in-force insurance policies were canceled effective on the earlier of April 15, 2019, or the date when the insured ceased making premium payments to Spirit. Thus, insurance coverage on active policies is provided through April 15, 2019, provided premiums are paid by insureds to the Company through such date.

INSUREDS MUST OBTAIN NEW INSURANCE POLICY COVERAGE WITH A DIFFERENT COMPANY ON AND AFTER APRIL 16, 2019.

Question 9: IF AN INSURED TOOK OVER THE DEFENSE OF A CLAIM COVERED BY HIS OR HER INSURANCE POLICY AFTER SPIRIT WAS PLACED IN RECEIVERSHIP AND HAS PAID, OR IS PAYING, HIS OR HER OWN LEGAL COSTS, WILL THE INSURED BE REIMBURSED FOR THOSE COSTS BY THE RECEIVERSHIP ESTATE?

Answer: Generally, when legal costs are incurred by an insured to defend a claim that is covered by a Spirit insurance policy, the cost will be considered an insurance policy benefit claim, provided that the insurance policy provides coverage for insurance defense costs. You should submit a claim for the defense cost to the Receiver via the receivership claim procedure, including the Proof of Claim Form. All such defense cost claims are subject to the moratorium on claim payments imposed by the Receiver for the protection of all of Spirit’s insureds, creditors, and the public. The Receiver provides no guaranty of reimbursement of defense costs and claim payments made directly by insureds, or the timing of any reimbursement payment that may be approved, as this will depend on the extent of any future distributions made by the Receiver, including a review and approval that paid costs and claims are covered by Spirit’s insurance policy.

Question 10: IS THERE AN INJUNCTION FROM COMMENCING, BRINGING, MAINTAINING, OR FURTHER PROSECUTING ANY ACTION AT LAW, SUIT IN EQUITY, ARBITRATION, OR SPECIAL OR OTHER PROCEEDING AGAINST THE COMPANIES, RECEIVER, OR SDR?

Answer: Yes, the Permanent Order of receivership provides that all persons are enjoined from commencing, bringing, maintaining, or further prosecuting any action at law, suit in equity, arbitration, or special or other proceeding against Spirit, the Receiver, or the SDR, unless brought in the Receivership Court. This injunction is a permanent one and continues to apply through the liquidation phase of the receivership.

Please note that this injunction does not apply to lawsuits against Spirit policyholders.

Question 11: WHEN WILL CLAIMS BE PAID?

Answer:

We are unable to advise you at this time how soon claims will be evaluated and paid, but this is a priority for the receivership team.

The Claims Filing Deadline is May 31, 2021, and no distributions of estate assets (i.e., claim payments) can be made before that date. Nevada law calls for Spirit’s claims to be classified and placed in an order of priority for payment that is established by NRS 696B.420. The statute states that each claim in each class must be paid in full or adequate money reserved for the payment before the members of the next class receive any payment. NRS 696B.420(1). This means, for example, that the claims of Spirit’s shareholders or other owners, ranked as class “l” by NRS 696B.420(l), cannot be paid if there are not enough assets in the estate to pay 100% of all claims assigned to a higher priority class (i.e., classes NRS 696B.420(a) – (k)).

It is not yet certain whether there will be enough assets to pay all classes of claims in full. Also, no claim will be processed or paid unless a POC Form has been submitted to the Receiver for that claim. The court-approved Receivership Claims and Appeals Procedure and the POC Form are available for download on this web site.

Claims will only be paid subject to the approval of the Receivership Court, and subject to the availability of assets in the estate.

Question 12: HOW CAN I CONTACT RECEIVERSHIP STAFF DIRECTLY? IS THERE A RECEIVERSHIP WEB SITE?

Answer: If you have questions about a claim-related matter, you may call 1-833-242-6823 or e-mail SpiritDocuments@Tristargroup.Net. Criterion Claims Solutions of Omaha, Inc. is no longer handling Spirit claims and is not authorized to respond to Spirit inquiries. Please update your contacts accordingly.

If you would like to contact the Special Deputy Receiver directly, see below:

CANTILO & BENNETT, L.L.P.

Attention: Spirit SDR

PO. Box 184

Austin, Texas 78767

(512) 478-6000

Important notices and court filings will be posted to this web site under the “Receivership Documents” section. You may wish to check the site regularly to stay informed about the status of Spirit.

Question 13: WHEN MUST A POC BE FILED?

Answer: May 31, 2021, is the Claims Filing Deadline (the “Deadline”) set by the Receivership Court for the submission of Spirit’s claims. It is advisable to keep a copy of the POC Form and proof of its timely mailing and receipt.

Question 14: WHERE DO I FILE MY POC?

Answer: It is recommended that you return the POC form using Certified Mail, Return Receipt Requested, or another method providing proof of delivery. Please retain a copy for your records, and submit the original signed POC form and accompanying documentation to:

CANTILO & BENNETT, L.L.P.

Attention: Spirit SDR

PO. Box 184

Austin, Texas 78767

Claimants are responsible for assuring that their claims are received by the deadline!

Question 15: WHAT IF I DO NOT FILE MY CLAIM BY THE DEADLINE?

Answer: Claims must be submitted to the SDR on or before the Deadline of May 31, 2021, or else will be forever barred from sharing in the assets of the receivership estate of Spirit. In order for a POC Form to be considered timely filed, it must be postmarked or delivered to the SDR on or before the May 31, 2021, Deadline. Claims that have not been rendered absolute (i.e., both liquidated in amount and non-contingent) on or before May 31, 2021, may not share in the assets of the estate (subject to any exceptions found in NRS 696B.450, which will be in the Receiver’s sole discretion to determine). Failure to complete the POC Form according to the instructions may cause your claim to be delayed or disallowed.

Question 16: DO I NEED AN ATTORNEY TO FILE A POC?

Answer: No. The receivership procedures are designed to enable claimants to avoid that expense, though you may engage counsel if you so desire.

Question 17: WHAT INFORMATION IS REQUIRED WHEN I FILE MY CLAIM?

Answer: All claims submitted to the SDR must be accompanied by a signed and notarized POC Form. All claims shall set forth in reasonable detail the amount of the claim, or the basis upon which that amount can be ascertained, the facts upon which the claim is based, and the priorities asserted, if any. Claims must be verified by the affidavit of the claimant or executed by someone authorized to act on behalf of the claimant and having knowledge of the facts. Claims must also be supported by the applicable written documentation or proof. Blank or substantially incomplete POC Forms will not be processed and will be rejected by the SDR. Claimants may request a status update on their claim by contacting the SDR at any time, but claimants should not make duplicate claim submissions as doing so wastes the assets of the estate. The SDR reserves the right to apply an offset of cost to recoup the processing cost for duplicate submissions.

Question 18: WHAT BACKUP DOCUMENTATION SHOULD I FILE WITH MY POC?

Answer: You should file all of the supporting documentation that you have, which you believe may be relevant to the Receiver’s determination of your claim. For example, you should include itemized copies of any bills for which you are requesting reimbursement, copies of the checks by which you paid the bills, and copies of any other records that support the billing, etc. After review of your POC Form, the SDR will contact you, if necessary, and request any additional information and/or documentation that is required for your claim. It is recommended that you keep all the records pertaining to your claim at least until you receive a final determination from the Receiver about your claim.

Question 19: CAN A POC BE SUPPLEMENTED?

Answer: Yes. Assuming you submitted a claim on or before the Deadline, you can file supplemental information prior to the Deadline. The Deadline is the date by which all claims must be non-contingent and liquidated in amount. Supplemental information should be submitted to complete the original claim, because if a claim is still contingent and/or unliquidated after the Deadline, it will be permanently barred from payment or reimbursement. Additionally, a supplemental POC Form should be filed (1) for any additional reimbursements or payments not requested in your initial POC Form, or (2) to complete the claim filed in your initial POC Form.

Question 20: WHAT IS A CONTINGENT CLAIM?

Answer: A contingent claim is a claim that has not been asserted or one for which payment is not yet owed, because it is dependent upon a future event or an event that may never happen. Claims that remain contingent after the Deadline (i.e., May 31, 2021) will be permanently barred from payment or reimbursement (subject to any exceptions found in NRS 696B.450, which will be in the Receiver’s sole discretion to determine).

Question 21: WHAT IS AN UNLIQUIDATED CLAIM?

Answer: An unliquidated claim is one for which liability has been established, but the exact amount has not been determined. For example, an unliquidated liability claim is one that the parties agree (or a court has ruled) is owed, but for which the parties have not agreed upon the amount and no judgment has been rendered so determining. Claims that remain unliquidated after the Deadline (i.e., May 31, 2021) will be permanently barred from payment or reimbursement (subject to any exceptions found in NRS 696B.450, which will be in the Receiver’s sole discretion to determine).

Question 22: HOW WILL I KNOW WHETHER MY POC WAS RECEIVED?

Answer: To reduce expenses to the receivership estate, the SDR will not be sending acknowledgement of receipt of the POC Forms. You will, however, receive notice of any decision on your claim at the address you have provided to the SDR on the POC Form. It is therefore very important to keep the SDR advised of any change in your address.

Question 23: WHAT KIND OF NOTICE WILL I RECEIVE WHEN A DECISION IS MADE ON MY CLAIM?

Answer: A “Notice of Claim Determination” will be issued for all POC Forms. The Notice of Claim Determination will set forth whether or not your claim has been approved for payment, and (in most cases) if approved, for how much. If you disagree with the decision set forth on this Notice of Claim Determination, you can appeal in accordance with the Receivership Claims and Appeal Procedure (“RAP”). The RAP is found on this web site.

Question 24: I FILED MY POC FORM — WHAT HAPPENS NEXT, AND WHEN?

Answer:

Due to the limited assets of Spirit in liquidation, we are not providing written acknowledgment of the receipt of POC Form filings to claimants (see Question #22, above). However, after mailing your POC Form, you may contact the SDR to confirm receipt of your documents and the reference number that has been assigned to your claim. To do so, please call (512) 478-6000.

Once you have filed a POC Form, the SDR will review your filing and will write to you if there is any documentation missing that is needed to adjudicate your claim or if your POC Form is defective for any reason (for example, if the form was not signed and notarized) — and you will then have the opportunity to cure the defect and/or submit the missing documentation for the claim. Because Spirit is a company in liquidation, you should not wait to receive an “initial offer” of settlement, as may have been typical practice pre-receivership. Instead, your POC Form should include the amount that you are demanding that the estate of Spirit pay to you for your claim. After the Deadline on May 31, 2021, the SDR will issue written Notice of Claim Determinations (see Question & Answer #23, above) which will advise you of whether your claim has been denied, approved, or approved in part.

Notice of Claim Determinations will not be issued until after the Deadline, and no distributions (i.e., claim payments) can be made from the assets of the estate until after the Deadline. There is no set timeline of when claim distributions may be made, and any distributions will ultimately require receivership court approval. See also, Question & Answer #11 above (“When will claims be paid”).

Question 25: I HAVE A STATUTE OF LIMITATIONS DEADLINE APPROACHING RELATING TO MY CLAIM AGAINST A SPIRIT POLICYHOLDER. CAN THE RECEIVER TOLL THE STATUTE OF LIMITATIONS ON BEHALF OF THE POLICYHOLDER?

Answer:

No. We cannot act on behalf of a Spirit insured to toll a statute of limitations or waive any other defense on behalf of a policyholder. You must act to protect your claim however you see fit, either through reaching a tolling agreement with the insured or by filing an action to preserve your claim.

Question 26: CAN THE SDR DRAFT AND/OR SIGN AN AFFIDAVIT OR OTHER LEGAL DOCUMENT FOR ME? CAN A REPRESENTATIVE OF THE SDR MAKE AN APPEARANCE IN MY PROCEEDING OUTSIDE THE RECEIVERSHIP COURT?

Answer: No, the limited resources of the estate prevent us from doing so.

Question 27: CAN THE RECEIVERSHIP PROVIDE POLICYHOLDERS WITH LOSS RUNS?

Answer: Responding to the loss run requests of Spirit’s policyholders requires considerable estate resources. The Receiver will respond to one loss run request per policyholder per calendar year, at no charge to the policyholder. There will be a $35.00 fee for each additional request made for a policyholder’s loss run within the same calendar year. Loss run requests should be directed to SpiritDocuments@tristargroup.net (Please include “Loss Run Request” in the subject line of the e-mail).