FLGA | What Happens When an Insurer Goes OUT OF BUSINESS?
4-Hour Law & Ethics Update – 2023
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By: Jason L. Perez
Department Authorized Insurance Education Provider
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CONSUMER ALERT | TALLAHASSEE, Fla.
Press Release 04.15.2022
Bank of America Not Processing
Florida Chief Financial Officer (CFO) Jimmy Patronis issued a consumer alert regarding Bank of America (BoA) that terminated its banking relationship with Avatar Property & Casualty Insurance Company (“Avatar”), which is currently in receivership for purposes of liquidation.
- [Define] Receivership – [Identify] Receiver
- [Define] Liquidation – [Identify] Liquidator
These days, property insurers are dropping like branches in a windstorm so… GOOD LUCK finding affordable homeowners’ insurance if you live in a high-risk coastal area.
Avatar is one of Mother Natures the latest victims.
According to state records, Avatar had approximately 37,000 policies in force. As part of their normal claim handling practices, the insurer mailed out claim checks to policyowners. These aren’t normal times. Avatars was about to be declared INSOLVENT – Financially unstable beyond the point of rehabilitation.
Bouncy – Bouncy – Bouncy…
Liquidation Orders arrived before policyowners cashed their claim checks.
Court took control of Avatar on March 14th.
Riddle Me This.
- Which Division of the Department is responsible for working through Avatar’s records and communicating with policyholders?
- WHY is communicating with Avatar policyholders NOT the responsibility of the DFS Division of Consumer Services?
During the liquidation of an insurer’s assets Florida Insurance Guaranty Association (“FIGA”)., is responsible for reviewing and processing active claims. At this stage, the Department becomes responsible for identifying EVERY uncashed claim check Avatar has issued. This information is turned over to FIGA.
- Florida Insurance Guaranty Association reviews policyholder claims and pays according to their claim handling guidelines.
- If a policyholder or other payee received a Bank of America check from Avatar for payment unrelated to an insurance claim, they will need to file a proof of claim with the Receiver.
Notifying over 37,000 clients that their insurer went bankrupt isn’t easy. The DFS stays involved in all insurance matters until they’re resolved. Sometimes the situation requires the muscle of an investigator. With insolvent insurers, administrative support is needed the most.
- Proof of Claim Forms are mailed to Avatars creditors and eventually posted on the Avatar website.
- www.avatar-liquidation.com
- Avatar’s policyholders could qualify as a creditor.
- Pre-paid insurance premiums need to be they’d be refunded.
- Policyholders with active unpaid claims are also creditors.
Bank of America had EVERY reason to reject Avatar’s checks. They didn’t want to catch a large and easy to foresee financial loss. The easiest solution was to terminate their relationship with Avatar and reject their checks. People with checks issued by Avatar should NOT attempt to deposit or cash it. Avatar checks will not clear and banking fees will likely apply.
CFO Jimmy Patronis said,
- “Anytime policyholders have to deal with their insurer going out of business, it’s a challenging situation, but unfortunately Bank of America is making things even worse.
The bank has outright declined to process checks already in the hands of policyholders so if someone has recently gotten a check from Avatar, we’re asking policyholders to not cash, or deposit, those checks. If they have a valid claim, they will get their money, but it’s going to come from the guaranty association and that will take time.
For any consumer that got charged an overdraft fee, keep those records.
I will formally ask BoA CEO Brian Moynihan to cover any overdraft fees that resulted from their actions. The bank has trillions of dollars in assets, and they market themselves as big believers in being good members of the community.
I take them at face value and will work to make these consumers whole.”
Which Insurance Regulatory entity is responsible for overseeing the liquidation of Avatar?
Which Florida regulatory entity was responsible for auditing the financial soundness of Avatar Property & Casualty Insurance Company?
Which Insurance Regulatory entity is responsible for overseeing the liquidation of Avatar?
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Jason L. Perez - The Florida Local
