RICHARD PIERSOL/Lincoln Journal Star | Posted: Thursday, October 12, 2006 7:00 pm
More than three years after National Warranty Insurance Group collapsed, its liquidators are asking people burned by the Lincoln company’s insolvency to turn in claims if they think they are eligible.
Circumstances suggest those people face a difficult time collecting, given that word “eligible.”
The public notice from the liquidators, KPMG Caymans partners, was published in an advertisement Friday on page 4A of USA Today, the national newspaper published by Gannett.
Ordered by the Grand Court of the Cayman Islands, still supervising the liquidation of National Warranty, the national notice addresses people who owned motor vehicle service contracts backed by National Warranty.
Those who want to make a claim, and believe they are eligible, are advised to visit the Web site, www.nwig.com, download a claim form, fill it out and send it to the liquidators at a Lincoln address by Nov. 30.
But it’s clear the liquidators still believe National Warranty isn’t responsible for most claims. The liquidators estimated early in the case there could have been half a million vehicle service contracts covered by National Warranty in force at the time of its insolvency.
“There will be limited circumstances in which a claim under a (vehicle service contract) will arise against NWIG,” the liquidators’ statement says. “Claims under (vehicle service contracts) should be honored by the person who sold or issued the VSC. Their name is on the VSC and you should also contact them.”
And in any case, those who believe they are eligible to make a claim shouldn’t expect to be made whole for their investment in a vehicle service contract backed by National Warranty, or reimbursed completely for repairs done under one of those contracts, according to the notice.
“NWIG is insolvent and even if your claim is accepted it will probably not be paid in full,” the notice said. The liquidators could not be reached for comment Friday.
Details of the claim form show that there are about as many ways and reasons to make a claim as the insolvent company had associations with other companies that marketed the motor vehicle service contracts, from service stations to sophisticated Internet marketing organizations.
For example, those who held contracts issued by Warranty Gold Ltd., but insured and administered by National Warranty, are told their claims against NWIG have been transferred to the trustee under Warranty Gold’s bankruptcy plan of reorganization, and they cannot claim against National Warranty directly.
Warranty Gold, a Texas company, collapsed when National Warranty couldn’t cover its claims.
People who bought a service contract from a car dealership that wouldn’t perform on the contract are told in the notice they “may be entitled” to make a claim against National Warranty.
Other instructions govern claims from those who had a vehicle service contract issued or covered by SC&E Administrative Services Inc, or American Prime Asset under the Smart Choice or Encore vehicle service programs, or Triad Marketing Group LLC.
This kind of notice is typical in bankruptcies and insolvencies, according to Tim Wagner, director of the Nebraska Department of Insurance.
“People move with such frequency that any form of notice is difficult,” he said in an email to the Journal Star. “The liquidators do have on file those individuals that submitted claims. It’s not a perfect system and some will not know of their rights.
“This is unusual in that for the vast majority of claimants, their rights were limited by their incorporation into a class-action lawsuit they knew nothing about,” Wagner said.
That was a Nevada state court case in which National Warranty’s marketing partners freed themselves from liability to plaintiffs by promising to the class of consumers any money they might get from their own multimillion-dollar claims against National Warranty, or from their share in any lawsuits against National Warranty’s other associates, auditors, reinsurers, actuaries, accountants and liquidators.
People who held vehicle service contracts were given a deadline in mid-December of 2005 to file a claim under that class action, or opt out of that settlement, which Wagner and his department opposed on behalf of Nebraska consumers.
It would have been difficult for anyone but the most informed and sophisticated owner of a vehicle service contract to have made that decision, Wagner said.
SC&E was the marketing company whose management’s disputes with National Warranty’s management over financial responsibility for vehicle service contracts left the Lincoln company far short financially of what it needed to pay all its obligations.
In the summer of 2003, National Warranty, which as a risk retention group was allowed under federal law to be regulated only by the Cayman Islands, asked for protection under that Caribbean nation’s insolvency laws.
The liquidation of National Warranty, which was owned and run by Don Erway, a former state insurance department official, has been going on ever since.
Vehicle service contract insurance affiliate settles with Nebraska regulators
The latest local development in the National Warranty Insurance Group case was the Nebraska Insurance Department’s settlement of a petition against AI Life, a Nevis, West Indies, insurer affiliated with SC&E, and its executive, Robert Gattuso, accused by the department of offering insurance without authority in Nebraska.
AI Life was ordered to pay $100,000, and to pay claims of Nebraskans who opted out of a Nevada class action settlement. The company and Gattuso neither admitted nor denied they did anything wrong.
According to documents from National Warranty’s insolvency, AI Life was set up to perform an intermediate role for auto dealers who went through SC&E to set up their own reinsurance companies, which invested service contract premiums in tax-deferred accounts.
AI Life and Gattuso acted illegally with “numerous Nebraska businesses,” the petition said.
The only ones identified, Anderson Ford Co., which has dealerships in Lincoln, Grand Island, Iowa and Missouri, and H&M Financial Inc., an Omaha agency of SC&E, acknowledged having done business in the Smart Choice vehicle service contract program, but professed not to have ever heard of AI Life.
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Claim forms are available at
Reach Richard Piersol at 473-7241 or at dpiersol@journalstar.com