The Delaware Chancery Court placed Arrowood Indemnity Company in liquidation on November 8, 2023, by a liquidation order. The court found Arrowood to be insolvent by the court, and appointed a receiver to liquidate Arrowood’s assets, evaluate any claims made against Arrowood and evaluate the payment of claims made against it.

Background

Royal and SunAlliance insurance group (RSA), which had sold insurance throughout the US through Royal Indemnity Company, Royal Insurance Company and Royal Globe Queen Insurance Company of America, Eagle Indemnity Company and other affiliates[1] for decades, sold its run-off business to Arrowpoint Capital Corporation. That company later changed its name to Arrowood Indemnity Company.

Insurance companies are regulated in the US at the state level, and state insurance commissions evaluate the solvency of insurers and have the power to place insolvent insurers into run-off. Once in run-off, insurers cannot continue selling new insurance, but rather collect on reinsurance and service and ultimately pay claims made on already purchased insurance policies. Arrowood’s current liabilities all derive from policies that were sold in past years and decades by Royal and other insurance affiliates.

Recovery for Claims

The court set the bar date for claims against Arrowood for January 15, 2025. Thus, any policyholder with claims for coverage under insurance sold at any time by Arrowood, Royal or any other insurer in the RSA Group, must submit their proofs of claim no later than January 15, 2025. Policyholders who do not submit a Proof of Claim to the Delaware Bureau of Rehabilitation and Liquidation by a bar date set by the court in a liquidation proceeding typically cannot have their claims considered.

Policyholders who are not able to collect the full extent of their losses due to the Arrowood liquidation (which will likely be all Arrowood insureds) can apply to state insurance guaranty associations. Such associations are established to help reimburse policyholders unable to collect in full from an insolvent insurer. Policyholders should assess which guaranty association to apply for a particular loss, and what limitations different guaranty associations may place on recovery by policyholders for certain claims. As in any bankruptcy or liquidation, the statutory scheme establishes a hierarchy of what kind of claims get priority; while commercial policyholders may have a lower priority than creditors, individual consumers or others, it can still be worthwhile for commercial policyholders to submit claims to relevant state insurance guaranty associations.

If they recover, policyholders submitting claims will likely get only a percentage of the total claim submitted but overall recoveries in insurance liquidations sometimes can be considerable. Any claims against Arrowood can only be pursued in the Delaware Court of Chancery, and Arrowood’s assets will be distributed according to Title 18 § 5918 of the Delaware Code. The code lists nine classes of priorities to consider and which classes should be given priority in paying Arrowood’s liabilities.

The first three classes of priorities include Class I, which is dedicated to the administration of the Arrowood estate, which are paid in full before other claims. The second class is Class II, which are the administrative expenses of guaranty associations. The third class is Class III, which include claims by policyholders, beneficiaries and insureds.

Considerations Regarding the Arrowood Insolvency and January 15 Bar Date:

1. Check Your Insurance Policies. See if any of your insurance policies were issued by Royal or its affiliates in order to submit a Proof of Claim.
2. Submit Long-Tail Claims by the Bar Date. Submit long-tail claims by the bar date of January 15, 2025. Submitting before the bar date can ensure that your claim is given priority.
3. Follow Proof of Claim Instructions. Proof of Claim forms come with detailed instructions, and the requirements for filing are often strictly enforced. Failure to follow these filing instructions may result in the denial of your claim.

Conclusion

Policyholders can recover on claims long after an insurance company has dissolved or merged with others, and long after policyholders experience property damage or bodily injury. This is done by filing a long-tail claim. Long-tail claims can be placed on a submission deadline by the liquidation of an insolvent insurance company. In order to have long-tail and other claims given priority in liquidation payouts, policyholders should submit their claims by the Bar Date given in liquidation orders issued by courts.

Insurance recovery lawyers have the expertise necessary to help policyholders determine whether they can file a proof of claim, and can answer any questions that may arise in the filing process. Hunton Andrews Kurth’s insurance coverage counsel is here to help.

[1] Other companies included in the Arrowood liquidation include: American and Foreign Insurance Company, American and Foreign Marine Insurance Company, American Mutual Fire Insurance Company, Atlantic Indemnity Company, Atlantic Security Insurance Company, British & Foreign Insurance Company, Ltd., California Union Insurance Company, Capital Fire Insurance Company of California, Carolina American Insurance Company, Columbia Insurance Company, Connecticut Indemnity Company, Guaranty National Insurance Company, Founders’ Insurance Company, Federal Union Insurance Company, Law Union and Crown Insurance Company, Old Dominion Fire Insurance Company, Orient Insurance Company, Phoenix Indemnity Company, Safeguard Insurance Company and Unisun Insurance Company.