By Nathan Mayberg
ROCK HILL August 30, 2005 New York State Superintendent of Insurance Howard Mills and members of the New York State Insurance Department gave added hope to the future of Frontier Insurance and over 150 of its employees yesterday when Mills announced an agreement reached in Sullivan County Supreme Court wiping out the debt it owes the National Indemnity Company (NICO) while giving it an infusion of cash.
The state took over the company in 2001, when Frontier was mired in financial turmoil. Instead of liquidating Frontier, the state has worked to pay off more than $500 million in claims and reduced the companys deficit by $57 million.
One department official estimated that the new agreement, reached under Justice Nicholas Clemente, will avoid a future debt of $30 million. At one time, the company had a deficit of approximately $157 million, according to the department.
NICO now has a stake in the company, said Mills, although the percentage was not made available.
Were here today to thank [the employees] for their good work, said Mills. Were very confident that were making good strides and are on the way to bringing the company back.
Francesca Bliss, a state employee who helps run the company, said there is still some litigation, but the new ruling is a big relief.
The last few months have been very stressful, she said, because the court initially said it didnt have jurisdiction.
At first, there were objections to the agreement, which gives the department greater flexibility in running the company. The Frontier Insurance Group, a subsidiary in Texas, and other major creditors attempted to stop the move. However, the department was able to persuade them to drop their objections by stressing the economic benefits of the deal. Without the agreement, said Bliss, the company could have been liquidated.
In a prepared statement, Mills said, The New York State Insurance Department could have placed the Frontier Insurance Company into liquidation four years ago. But that would have put each and every Frontier employee out of work and adversely affected Sullivan Countys economy while also sending shockwaves through the nations already overburdened guarantee fund system.
Instead, New Yorks Liquidation Bureau, in concert with Frontier employees, continues to devote considerable energies to Frontiers emergence from rehabilitation so that it may once again operate as an independent company.