Opinion ID: 835369
Heading Depth: 2
Heading Rank: 2

Heading: Superior Group's Acquisition of Insurance Companies Doing Oregon Business

Text: This case arises out of the insolvency of defendant Commercial Compensation Casualty Company (CCCC) and other insurance companies under common ownership with CCCC. [1] On de novo review, we find the following facts. In 1998, Superior National Insurance Group, Inc. (Superior Group), an insurance holding company, acquired several commonly owned insurance companies, including CCCC, California Compensation Insurance Company (CalComp), and Business Insurance Company (BICO). Under the prior owner, CCCC had written few policies in Oregon, while BICO had substantial workers' compensation insurance business in the state. Superior Group, in turn, sold BICO's name and its certificate to write workers' compensation insurance in Oregon, but not BICO's assets or liabilities, to an unrelated company, Centre Insurance Group (Centre). To remove BICO's assets and liabilities before that sale, Superior Group transferred the assets to another company owned by Superior Group, defendant Superior National Insurance Company (SNIC). Those assets included $10.6 million in securities that BICO previously had deposited with DCBS in connection with the workers' compensation insurance policies that it had issued in Oregon, as required by Schedule P and ORS 731.628. As to BICO's liabilities, another Superior Group subsidiary, CalComp, agreed to reinsure all of BICO's pre-1999 liabilities, i.e., those based on the policies that BICO had written in Oregon before 1999. CalComp, in turn, reinsured its own reinsurance obligation as to those liabilities with its affiliated company, SNIC. In May 1999, BICO and SNIC reported those transfers and agreements to DCBS on their respective Schedule P forms. Superior Group's cover letter stated that SNIC is the ultimate 100% reinsurer [of BICO's pre-1999 liabilities], and BICO's Schedule P form noted that [SNIC] through [CalComp] was the reinsurer of those liabilities. [2] Thus, as of May 1999, SNIC owned the $10.6 million deposit that had been made with respect to BICO's pre-1999 liabilities and also was the ultimate reinsurer of those liabilities. In December 1999, the Superior Group companies entered into a second transaction with Centre, the company that had purchased BICO. The Superior Group companies made certain payments to Centre (as part of a much larger transaction) and Centre, in turn, agreed to release CalComp's and SNIC's reinsurance obligations with respect to the pre-1999 policies issued by BICO (with the exception of any liabilities in excess of $180 million). In that transaction, Centre also agreed to, and did, deposit securities with a market value of $10.2 million with DCBS to cover the pre-1999 liabilities that it had assumed. As a result, SNIC's $10.6 million deposit no longer was required under ORS 731.648 because SNIC no longer had any obligations with respect to the pre-1999 policies, except in the unlikely event that claims under those policies exceeded $180 million.