First Executive Policyholders Air Their Woes : Insurance: Judge hears stories of hardship caused by the conservatorship in the largest-ever failure of a life insurer.
One by one, they came forward Thursday to tell their stories of loss, hardship and shattered trust: A woman worried about caring for her retarded child; a man concerned about supporting his family; a recent widow who could no longer pay her rent.
They were among about 400 individuals--policyholders, annuitants, attorneys and pension fund managers with an interest in failed Executive Life Insurance Co.--who appeared at a Los Angeles hearing presided over by Superior Court Judge Kurt J. Lewin.
The hearing is the first in what promises to be a long and complex legal battle over the assets of Executive Life, the largest life insurer to ever fail. The company was seized April 11 by state regulators as its financial condition weakened from junk-bond losses.
Thursday’s hearing was specifically designed to determine if the state Department of Insurance’s rehabilitation plan for Executive Life and subsequent regulatory actions were fair and were conserving the firm’s assets.
As expected, there were complaints that the conservatorship allows some policyholders to get all or part of their money while others get nothing. Currently, the Department of Insurance is allowing Executive Life to pay 100% on death benefits and 70% to those getting monthly annuity checks. Many other policyholders have been completely denied access to their funds although regulators maintain that the denial is temporary.
State regulators say the moratorium and limited payments are necessary to conserve the company’s assets while regulators negotiate with possible buyers.
Lewin appeared disturbed by the litany of horror stories by individual investors who said they were emotionally and financially devastated by the insurer’s failure and frustrated in efforts to obtain funds under court-allowed hardship exemptions.
“I am a mother pleading for my son’s life,” said Marion Lieberman, who said she needed her $200,000 Executive Life annuity to care for her severely retarded son. “Without this money to care for him, my son will be placed in a state institution for the mentally retarded, where he will surely die of neglect. I am asking the court to please not kill my son.”
Lieberman added that she had applied for a hardship withdrawal six weeks ago but has still not received a response.
Susan Bernstein, a recent widow, added: “I have spent the past month selling things to make the rent payment. I received an emergency application, but I need to be dead or dying to qualify.”
To obtain funds from Executive Life under the hardship rules, individuals must meet two of four criteria: They must be terminally ill or permanently disabled, have incurred substantial medical expenses not covered by insurance, have financial difficulties so severe that they cannot pay for essential life-support needs or be threatened with imminent removal from a medical care facility.
Lewin promised to reconsider the emergency standards, but he did not make any final rulings Thursday.
But weighing heavily on the minds of policyholders, regulators and the court was the knowledge that the company simply does not have enough money to pay everyone their due.
A study released Thursday said Executive Life may have had a $426.3-million deficit as of Dec. 31, 1990, compared to a $528.4-million surplus previously reported by the company.
