SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 10, 1996
SUNSTATES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-5300 22-1664434
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
4600 Marriott Drive, Suite 200, Raleigh, North Carolina 27612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 919-781-5611
(Former name or former address, if changed since last report.)
<PAGE>
Item 3. Bankruptcy or Receivership
Effective Monday, December 2, 1996, Sunstatates' insurance subsidiaries,
Coronet Insurance Company, National Assurance Indemnity Company, Crown
Casualty Company (collectively referred to as Coronet), as well as Casualty
Insurance Company of Florida, each voluntarily suspended issuing all new or
renewal policies. Coronet informed the Illinois Department of Insurance
that its continuing underwriting losses coupled with declines in the value
of its investment portfolio had reduced its statutory surplus to less than
the minimum amounts required under insurance regulations. On December 3,
1996, the Illinois Department of Insurance issued a Cease and Desist Order
prohibiting Coronet from issuing new or renewal policies in any of the 28
states in which it is authorized to conduct business.
On December 10, 1996, Coronet consented to an Order of Conservation
appointing the Director of Insurance of the State of Illinois as Conservator
of Coronet. The Order of Conservation authorizes the Conservator to take
possession and control of the property, books, records and assets of Coronet
and to supervise their business and affairs in an effort to conserve their
assets. The Order contains a temporary moratorium upon the payment of all
claims and loss related expenses subject to certain hardship provisions as well
as other contractual obligations of Coronet, until further order of the court,
as well as an injunction prohibiting suits against Coronet outside of the
conservation proceedings. Under the terms of the Order, Coronet will be
allowed to continue its efforts to secure approximately $20 million of new
capital to allow Coronet to resume writing new or renewal policies. However,
if Coronet is unsuccessful in obtaining such capital prior to December 23,
1996, the Director of Insurance is authorized to initiate the liquidation of
Coronet. Coronet was unable to secure the new capital.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99. Order of Conservation
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
SUNSTATES CORPORATION
/s/ Glenn J. Kennedy
Date: December 24, 1996 Glenn J. Kennedy
Chief Financial Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
EXHIBITS
FORM 8-K
CURRENT REPORT
Date of Report Commission File Number
December 10, 1996 1-5300
SUNSTATES CORPORATION
EXHIBIT INDEX
Exhibit No. Exhibit Description
99 Order of Conservation
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
PEOPLE OF THE STATE OF ILLINOIS, ex rel. MARK BOOZELL, DIRECTOR OF
INSURANCE OF THE STATE OF ILLINOIS,
Plaintiffs,
v.
CORONET INSURANCE COMPANY, an Illinois Domestic Stock, Property and
Casualty Insurance Company, NATIONAL ASSURANCE INDEMNITY COMPANY,
an Illinois Domestic Stock, Property and Casualty Insurance Company,
and CROWN CASUALTY COMPANY, an Illinois Domestic Stock, Property
and Casualty Insurance Company,
Defendants.
ORDER OF CONSERVATION
THIS CAUSE COMING TO BE HEARD upon the Verified Complaint for Conservation of
Assets and Injunctive Relief, filed herein by the PEOPLE OF THE STATE OF
ILLINOIS, on the relation of MARK BOOZELL, Director of Insurance of the State
of Illinois (hereinafter "Director"), for an order authorizing and directing
the Director to take possession and control of the property, accounts,
assets, books, records, business and affairs of CORONET INSURANCE COMPANY
(hereinafter "Coronet'), NATIONAL ASSURANCE INDEMNITY COMPANY, (hereinafter
"National Assurance") and CROWN CASUALTY COMPANY (hereinafter "Crown"); and to
conserve the same pursuant to the provisions of article XIII of the Illinois
Insurance Code (hereinafter "Code"), 215 ILCS 5/187, et 5N. (1996), and further
to protect the interests of Coronet's, National Assurance's and Crown's
policyholders and creditors, and of the general public; the Court having
jurisdiction over the parties hereto and the subject matter hereof; the Court
having reviewed the pleadings filed herein and having considered the arguments
of counsel thereon, and the Court then being otherwise advised in the premises,
and for good cause appearing therefore;
THE COURT FINDS:
1 . That, by his Verified Complaint, The Director seeks an Order of
Conservation against the Defendants, Coronet, National Assurance and Crown,
pursuant to Sections 186.1(3) and 188.1 of the Illinois Insurance Code,
215 ILCS 5/186.1(3) and 215 ILCS 5/188.1 By his Verified Complaint, the
Director alleges that sufficient cause exists under Section 188 of the Code,
215 ILCS 5/188, for the entry of an order of rehabilitation and/or liquidation
against the Defendants, Coronet, National Assurance and Crown, and each of
them, including, without limitation, the following facts and circumstances:
(i) That the Defendants, Coronet, National Assurance and Crown, and each of
them, have failed to correct the deficiencies and comply with the Director's
Corrective Orders [Nos. 001-92 and 01-96] issued against them within the time
prescribed by such Corrective Orders; and,
(ii) That the condition of Defendants, Coronet, National Assurance and Crown,
is such that their further transaction of business would be hazardous to their
policyholders, creditors and to the public; and,
(iii) That the Defendants, Coronet, National Assurance and Crown, and each of
them, by and through their respective Boards of Directors, have consented to
the commencement of conservation and/or rehabilitation proceedings against
them
and to the entry of this Order of Conservation; and,
(iv) That Defendants Coronet and Crown are financially impaired and are in
such condition that they cannot meet the minimum requirements for organization
and authorization as required by the laws of the State of Illinois; and,
(v) That Defendant Coronet is insolvent.
2. That, in light of the foregoing facts and circumstances, sufficient
cause exists for the entry of an order of rehabilitation and/or liquidation
against the Defendants, Coronet, National Assurance and Crown, and that it
is in the best interests of Coronet's, National Assurance's and Crown's
policyholders and creditors, and of the general public, that an ex parte
Order of Conservation be entered as to and against the Defendants, Coronet,
National Assurance and Crown, and each of them, in accordance with the
provisions of Article XIII of the Code, supra.
3. That, in addition to consenting to the commencement of conservation
proceedings and to the entry of this Order of Conservation, the respective
Boards of Directors of Coronet, National Assurance and Crown, and each of
them, have further consented and agreed to the following:
On or before December 23, 1996, Coronet, National Assurance and Crown shall
have obtained and provided to the Director a viable, firm and binding
commitment from a financially capable entity, in form and substance which is,
in his sole discretion, satisfactory and acceptable to the Director, providing
for an imminent capital infusion into Coronet in an amount not less than Twenty
Million ($20,000,000.00) Dollars; such capital infusion to comprise exclusively
cash, cash equivalents and/or publicly traded investment grade securities.
In the event that such a commitment, satisfactory and acceptable to the
Director, has not been obtained by December 23, 1996, the respective Boards of
Directors of Coronet, National Assurance and Crown, and each of them, consent
to the immediate entry of an Order of Liquidation as, to and against Coronet,
National Assurance and Crown, as the Director may deem proper in the premises.
IT IS, THEREFORE, HEREBY ORDERED:
A. That this Order of Conservation be and the same is hereby entered as,
to and against Coronet Insurance Company, National Assurance Indemnity Company
and Crown Casualty Company, and each of them;
B. That Mark Boozell, Director of Insurance of the State of Illinois, and
his successors in office, are hereby appointed as Conservator of the
Defendants, Coronet, National Assurance and Crown, (hereinafter 'Director" or
'Conservator"), and the Director is hereby authorized and directed to
immediately take possession and control of the property, books, records,
accounts, assets, business and affairs of the Defendants, Coronet, National
Assurance and Crown, and of the premises currently occupied, or hereafter
occupied, by Coronet, National Assurance and Crown for the transaction of their
business, pursuant to the provisions of Article XIII of the Code, 215 ILCS
5/187, et LN., and to conserve the same for the benefit of the policyholders
and creditors of Coronet, National Assurance and Crown, and of the public; and,
further, to take such actions that the nature of this cause and the interests
of the policyholders and creditors of Coronet, National Assurance and Crown, or
the public, may require, subject to the further orders of this Court;
C. That the Defendants, Coronet, National Assurance and Crown, and their
respective officers, directors, agents, servants, representatives, employees
and affiliated companies, and all other persons and entities, are hereby
ordered and directed to give immediate possession and control to the Director
of all property, books, records, accounts, assets, business and affairs of the
Defendants, Coronet, National Assurance and Crown, and all premises occupied by
Coronet, National Assurance and Crown, for the transaction of their business;
D. That all accountants, auditors, and attorneys of the Defendants,
Coronet, National Assurance and Crown, are hereby ordered and directed to
deliver to the Director copies of all documents in their possession or under
their control concerning or relating to the Defendants, Coronet, National
Assurance and/or Crown, and to provide the Conservator with such information as
he may require concerning any and all business and/or professional
relationships between them and the Defendants, Coronet, National Assurance
and/or Crown, and concerning any and all activities, projects, jobs and the
like undertaken and/or performed by them at the request of Coronet, National
Assurance or Crown, or their respective officers, directors, agents, servants,
representatives and/or employees, or which Coronet, National Assurance and/or
Crown may be, or are, entitled to as the result of their relationship with such
accountants, auditors and attorneys;
E. That the Defendants, Coronet, National Assurance and Crown, and their
respective officers, directors, agents, servants, representatives and
employees, and all other persons and entities having knowledge of this Order,
are hereby restrained and enjoined from transacting any business of Coronet,
National Assurance and/or Crown, or disposing of any company property or
assets, without the express written consent of the Director, or doing or
permitting to be done any action which might waste the property or assets of
Coronet, National Assurance or Crown, until further order of this Court,
F. That the officers, directors, agents, Servants, representatives and
employees of the Defendants, Coronet, National Assurance and Crown, and all
other persons, companies and entities having knowledge of this Order, are
hereby restrained and enjoined from bringing or further prosecuting any claim,
action or proceeding at law or in equity or otherwise, whether in this State or
elsewhere, against Coronet, National Assurance or Crown, or their property or
assets, or the Director of Insurance of the State of Illinois as their
Conservator, except insofar as those claims, actions or proceedings arise in or
are brought in these conservation proceedings; or from obtaining, asserting, or
enforcing preferences, judgments, attachments, encumbrances or other like
liens, including common law, retaining liens, or the making of any levy against
Coronet, National Assurance or Crown, or their property or assets while in
possession and control of the Conservator; or from interfering, in any way,
with the Conservator in his possession or control of the property, business,
books, records, accounts, premises and all other assets of Coronet, National
Assurance and Crown, until further order of this Court;
G. That any and all banks, brokerage houses, financial institutions and
any and all other companies, persons or entities having knowledge of this
Order, having in their possession accounts and any other assets which are, or
may be, the property of Coronet, National Assurance or Crown, are hereby
prohibited, restrained and enjoined from disbursing or disposing of said
accounts and assets, without the express written consent of the Conservator,
and all such persons and entities are hereby further prohibited, restrained and
enjoined from disposing of or destroying any records pertaining to any business
transactions between Coronet, National Assurance or Crown, and such banks,
brokerage houses, financial institutions, companies, persons or entities having
done business, or doing business, with Coronet, National Assurance or Crown, or
having in their possession assets which are, or may be, the property of
Coronet, National Assurance or Crown; and that each such person or entity is
hereby ordered to immediately deliver possession and control of any and all
such accounts, assets and/or records to the Conservator;
H. That all agents and brokers of Coronet, National Assurance and Crown,
and their respective agents, servants, representatives and employees, and all
other persons, companies and entities having knowledge of this Order, are
hereby restrained and enjoined from returning premium, earned or unearned,
or
any money in their possession, or under their control, Collected in connection
with policies, contracts, certificates or treaties of insurance or reinsurance
previously issued, or to be issued, by Coronet, National Assurance or Crown, to
policyholders or others, and said agents and brokers, and their respective
agents, servants, representatives and employees, and all other persons,
companies and entities are hereby ordered and directed to immediately turn over
all such funds in their possession or under their control, or to which they may
hereafter acquire possession or control, to the Conservator in gross and not
net of any commissions which may be due thereon: provided however, agents and
brokers may remit net premium for business in force prior to the date of this
order and/or any prior cease and desist order.
I. That a moratorium is hereby issued and established enjoining and
prohibiting the Defendants, Coronet, National Assurance and Crown, and each
of
them, and their respective directors, officers, agents, servants,
representatives and employees, and all other persons and entities, from paying
any claims, loss adjustment expenses or other contractual obligations incurred
by the Defendants, Coronet, National Assurance or Crown, the result of Coronet,
National Assurance or Crown having issued contracts, policies or certificates
of insurance; except as otherwise provided herein, until further order of this
Court;
J. That certain "Hardship Claims" shall be excepted from the moratorium
set forth in Paragraph (1) herein, and that the Conservator is hereby
authorized
to pay such "Hardship Claims, subject to sufficient available
assets and upon the terms and conditions set forth herein.
A "Hardship Claim" shall be defined as follows:
A claim which is determined, at the sole discretion of the Director, and
without further order of the Court, and subject to reasonable and sufficient
proof being presented, to be a covered claim for a significant economic loss
which requires immediate relief and no other economic resource is reasonably
available to the claimant to meet that loss. This would include, but is not
limited to:
(i) Claims by or against a Coronet, National Assurance or Crown insured,
and corresponding loss adjustment expenses related thereto, if necessary and
appropriate, associated with the covered loss of use of a vehicle due to
mechanics liens, or otherwise, when such vehicle is reasonable necessary for
employment or other essential needs; and
(ii) Third-party claims against a Coronet, National Assurance or Crown insured
which have resulted in judgment(s) against such insured, and which have further
resulted in the Secretary of State, in this or any other State, having revoked
or suspended the drivers license of such insured, when that drivers license is
necessary for the insured's employment or other essential needs.
K. That a moratorium is hereby issued and established enjoining and
prohibiting the Defendants, Coronet, National Assurance and Crown, and each of
them, and their respective directors, officers, agents, servants,
representatives and employees, and all other persons and entities, from paying
any claims or other contractual obligations incurred by the Defendants,
Coronet, National Assurance and/or Crown, the result of Coronet, National
Assurance or Crown having assumed any liabilities under agreements, treaties,
certificates or contracts of reinsurance, until further order of this Court;
L. That a moratorium is hereby issued and established enjoining and
prohibiting the Defendants, Coronet, National Assurance and Crown, and each
of
them, and their respective directors, officers, agents, servants,
representatives and employees, and all other persons and entities, from paying
any and all contractual obligations of Coronet, National Assurance or Crown,
owing to their creditors and vendors or their respective assignees, or any
other persons, or entities, except insofar that such payments are deemed
necessary, by the Director, for the administration of the conservation of
Coronet, National Assurance and Crown, as contemplated by 215 ILCS 5/202, until
further order of this Court;
M. That any and all persons, companies and entities are hereby restrained
and enjoined from construing this Order as an anticipatory breach of any
contract, including, but not limited to, agreements, treaties, certificates or
contracts of reinsurance, heretofore entered into with the Defendants, Coronet,
National Assurance or Crown;
N. That it is hereby ordered that hereafter the caption in this cause and
all pleadings filed in this matter shall read:
"IN THE MATTER OF THE CONSERVATION
OF CORONET INSURANCE COMPANY, ET AL."
0. That the Conservator is hereby directed to ascertain the condition of
the Defendants, Coronet, National Assurance and Crown, while he is in
possession and control of the property, books, records, accounts, assets,
premises, business and affairs of Coronet, National Assurance and Crown, and to
make periodic reports to this Court as to the nature of the Defendants,
Coronet, National Assurance and Crown, while in conservation; and that the
Conservator is further directed to file with this Court, for its consideration,
reports in accordance with Section 202 of the Code, 215 ILCS 5/202.
P. That the Conservator is hereby authorized to pay, from the assets of
the Defendants, Coronet, National Assurance and Crown, those expenses incurred
during the course of the conservation of Coronet, National Assurance and Crown,
for attorneys' fees, accounting fees and consulting fees as administrative
expenses, pursuant to and consistent with the provisions of Section 202 of the
Code, Id.;
Q. That all costs of these proceedings be and the same are hereby taxed
and assessed against the Defendants, Coronet, National Assurance and Crown;
R. That this Court shall retain jurisdiction in this cause for the
purpose
of granting such other and further relief as the nature of the cause,
and the interests of the Defendants, Coronet, National Assurance and Crown, and
their respective policyholders and creditors, or of the public, may require.
ENTERED:
Clerk of the Circuit Court
Aurelia Pucinski
December 10, 1996
Judge: E. Reid #191
Judge Presiding
JAMES E. RYAN
Attorney General of Illinois
Attorney for the PEOPLE OF
THE STATE OF ILLINOIS
Roger P. Flahaven
Andrew N. Levine
Assistant Attorneys General
James R. Thompson Center
100 West Randolph Street
Thirteenth Floor
Chicago, Illinois 60601
(312) 814-2822
Attorney Code #99000
Of Counsel:
Peter G. Gallanis
Dale A. Coonrod
Michael J. Buresh
Counsel to the Director as Receiver
222 Merchandise Mart Plaza
Suite 1450
Chicago, Illinois 60654
(312) 836-9500
Attorney Code #16819
