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UNITED STATES
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) June 23, 1998
-----------------------------
Professional Benefits Insurance Corporation
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 0-22344 74-2072535
- -----------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
10835 Rockley Road, Houston, Texas 77099
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (231) 721-1800
---------------------------
- -----------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
PROFESSIONAL BENEFITS INSURANCE COMPANY
Form 8-K
Item 3. Bankruptcy or Receivership
Professional Benefit Insurance Company ("PBIC") is an insurance
company organized in the State of Texas and licensed to conduct the business of
Insurance. The company primarily sold Individual Life, Group Accident and
Health, Group Dental and Medicare Supplement policies. While 74% of its total
business is written in Texas, it is licensed is six states with Oklahoma,
Arizona and New Mexico writing the remainder of its business. Beginning in the
3rd and 4th quarters of 1996, PBIC began a negative earning trend. PBIC
produced a loss of approximately $930,000.00 before taxes in 1996. The negative
trend continued throughout all of 1997, with the statutory financial statements
showing a loss of $2,238,705 before taxes. This negative trend was attributed
to two primary causes. One, the hospital and medical providers' expenses
exceeded premium income and the company waited too long to take the corrective
measures to increase premiums to stay current with the cost increases. When the
company did start increasing premiums on an incremental basis to phase-in the
higher costs, it was too late and the phase-in could not be completed in time.
Second, the Company did a poor job of underwriting in the Oklahoma market and
experienced incredibly claims losses. There were other medical groups that also
had high loss ratios. The Company eventually terminated the group dental
business, but not in time to save the company. These delays depleted the
company's reserves, which necessitated the intervention of the Texas Department
of Insurance.
The Texas Department of Insurance placed PBIC into confidential
supervision on October 14, 1997 and tried to work with the company to create a
plan of rehabilitation either through increasing rates or assistance with
finding a purchaser for the business. Unfortunately, the Company could not
secure additional capital infusions to make the company statutorily solvent,
and the Department was required to place the company into receivership. As
reported on its prior Form 8-K filing, a Temporary Restraining Order and Order
Appointing Temporary Receiver was issued by the Travis County District Court on
April 30, 1998.
On June 23, 1998, the District Court of Texas issued a Permanent
Injunction and Order Appointing Permanent Receiver against PBIC. This order
placed the company in Receivership pursuant to Article 21.28 of the Texas
Insurance Code. The effect of the order is that PBIC will be liquidated
according to the statutory scheme outlined in Art. 21.28 and its assets will be
distributed according to Article 21.28 Section 8.
The McCarren-Ferguson Act, codified in 15 U.S.C. Sections 1011-1015,
preserves state regulation of the activities of insurance companies. This is
particularly applicable in situations where state has enacted a statutory scheme
to handle issues such as insurance company insolvencies. Congress has excluded
insurance companies from the provisions of the federal bankruptcy law. 11 U.S.C.
Section 109. As a result of this historical exclusion of insurance companies
from the bankruptcy act, courts have maintained that the proper procedures and
rules for "dismemberment" of insurance companies "is a question as to which the
Supreme Court of each State will speak with ultimate authority." Clark v.
Willard, 54 S.Ct. 615, 620 (1934).
<PAGE> 3
Article 21.28 Section 2 provides that all property and assets are
placed in the custody of the Court. The Commissioner of Insurance is appointed
the Receiver of the company and has title to those assets. The Commissioner of
Insurance appoints a Special Deputy Receiver ("SDR") to marshall the assets and
liquidate the company under the supervision of the Texas Department of
Insurance and the Court. A Special Deputy Receiver was appointed on June 16,
1998. A copy of the Permanent Injunction is submitted as an Exhibit to this
Form 8-K.
On August 15, 1998, the SDR will file its first report with the
District Court reporting on the activities since the institution of receivership
proceedings by the Temporary Injunction and Order Appointing Temporary
Receiver, April 30, 1998, through July 31, 1998. After that, the SDR will file
monthly reports on the 15th on each month. Each monthly report will detail the
expenses and collection activities of the SDR in performing the liquidation
process for the month and will include a balance sheet setting forth the assets
and liabilities.
Item 5. Other Events
The Permanent Injunction issued on June 23, 1998 in Cause No.
98-04500; The State of Texas vs. Professional Benefits Insurance Company, in the
201st Judicial District Court of Travis County, Texas, provides in Paragraph II,
1-1.(b) that stockholders are enjoined from "wasting, disposing of, using
transferring, selling, assigning, canceling..." the stocks. On May 22, 1998,
each stockholder was sent a letter informing them that the Texas Department of
Insurance had put the company in liquidation and that the prospect of receiving
any return on the investment in the Stock is "Very Bleak". Further, the SDR
is awaiting court approval of its proposed Notice Letter and Proof of Claim
Form, which is sent to all individuals whose names appear in the books and
records of the company, which includes all Stockholders. It is anticipated
that within the next 10 to 15 days each stock holder will get a Notice Letter
informing them of the Receivership process, providing a proof of claim, and
instructions on how to complete the proof of claim. A copy of the "Proposed"
Notice Letter and Proof of Claim form is submitted as an Exhibit to this Form
8-K.
Item 7. Financial Statements and Exhibits
As of the date of this Form 8-K there are no updated financial
statements different from the ones filed with Form 8-K dated May 15, 1998. On
August 15, 1998, the SDR will file its first report with the District Court
reporting on the activities since the institution of receivership proceedings
by the Temporary Injunction and Order Appointing Temporary
<PAGE> 4
Receiver, April 31, 1998, through July 15, 1998. After that, the SDR will file
monthly reports on the 15th on each month. Each monthly report will detail the
expenses and collection activities of the SDR in preforming the liquidation
process for the month and will include a balance sheet setting forth the assets
and liabilities.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
Professional Benefits Insurance Company, in Receivership
By:
------------------------------------------
Name: Ernesto Garza
----------------------------------------
Title: Special Deputy Receiver
---------------------------------------
Date: August , 1998
----
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
99.1 Permanent Injunction and Order Appointing Permanent Receiver
99.2 Notice Letter and Proof of Claim to be mailed to Shareholders
</TABLE>
<PAGE> 1
NO. 98-04500
THE STATE OF TEXAS, ) IN THE DISTRICT COURT OF
Plaintiff )
)
VS. ) TRAVIS COUNTY TEXAS
)
PROFESSIONAL BENEFITS )
INSURANCE COMPANY, )
Defendant ) 201ST JUDICIAL DISTRICT
PERMANENT INJUNCTION,
AND ORDER APPOINTING PERMANENT RECEIVER
On this day came to be considered the above-referenced cause for a
PERMANENT INJUNCTION, AND ORDER APPOINTING PERMANENT RECEIVER as filed by the
State of Texas. The State of Texas appeared by and through its Attorney
General, Dan Morales. After due notice of hearing, PROFESSIONAL BENEFITS
INSURANCE COMPANY, Houston, Texas, (hereinafter sometimes referred to as
"DEFENDANT") did not appear, though properly served and cited to appear.
The Application requests that a Permanent Injunction be issued against
DEFENDANT, its affiliates, and those acting in concert with it or in its
behalf, and that the Commissioner of Insurance of the State of Texas be
appointed as Permanent Receiver for DEFENDANT.
I.
FINDINGS
1. The Court finds that it has jurisdiction of the parties and of the
subject matter herein, and the Court, after considering the Plaintiff's
verified claim, is of the opinion and finds that this Court has
jurisdiction over DEFENDANT, that the law and the facts are what the
Plaintiff has alleged in its duly verified claim and that Plaintiff is
entitled to a PERMANENT INJUNCTION AND ORDER APPOINTING PERMANENT RECEIVER
as granted herein.
<PAGE> 2
2. The Court finds that the Plaintiff, through its Attorney General, Dan
Morales, under the authority granted to him by the Constitution and laws of
this State, and also at the request of the Commissioner of Insurance of the
State of Texas, has a probable right and probably will prevail upon final
hearing of this action and without the issuance of this Permanent
Injunctive relief, the Plaintiff will probably suffer irreparable injury as
set forth herein. There is no adequate remedy at law.
3. The Court finds that DEFENDANT is insolvent and in a hazardous
financial condition and is not in compliance with TEX. INS. CODE ANN. arts.
1.10 Sections 5, and 3.02 (Vernon Supp. 1997). The Court further finds
that the continued operation of DEFENDANT will be hazardous to its insureds
and creditors, and that unless permanently enjoined, it will continue to
operate in violation of the laws of this State and that it will continue to
create debts and obligations and to deplete the assets of DEFENDANT, all
contrary to the best interests of its policyholders, creditors and the
general public and that by reason of these premises, immediate and
irreparable injury, loss and damage will result to the policyholders and
creditors.
4. The Court further finds that unless DEFENDANT is permanently enjoined,
that assets of DEFENDANT may be subjected to claims or illegal preferences,
to the immediate and irreparable injury of its policyholders and creditors.
5. Because of the foregoing, the Court finds that there exists an
imperative and immediate necessity to enjoin DEFENDANT from conducting any
business of DEFENDANT as enjoined herein and to appoint the Commissioner of
Insurance of the State of Texas as Permanent Receiver of the affairs of
DEFENDANT in order to manage, maintain, and preserve the affairs of
DEFENDANT during the pendency of these proceedings and to wind-up and
liquidate the property and business of DEFENDANT.
6. The Court further finds that the Permanent Receiver is vested by
operation of law with title to all property and assets of DEFENDANT, and
that the Permanent Receiver
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 2 of 13
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succeeds to all rights of DEFENDANT, including, but not limited to, the
rights of DEFENDANT as a customer of any financial institutions.
7. The Court further finds that DEFENDANT was duly and properly served
and notified of this hearing.
II
PERMANENT INJUNCTION
It is ORDERED that the Clerk of this Court shall issue a Permanent
Injunction against the following named persons and entities with the following
force and effect:
1. Injunction Against Defendant and Those Related to it
TO: PROFESSIONAL BENEFITS INSURANCE COMPANY, ITS DIRECTORS AND FORMER
DIRECTORS (INCLUDING, BUT NOT LIMITED TO, JAMES O. HENRY, JR., D.D.S.,
ROBERT W. LITTLE, D.D.S., WILLIAM L. GLENN, JR., D.D.S., AND HOBERT P.
LUNDBLADE, D.D.S.); ITS OFFICERS AND FORMER OFFICERS, (INCLUDING, BUT
NOT LIMITED TO, JERRY CAMPBELL, VICE PRESIDENT, ROBERT W. LITTLE,
TREASURER, WILLIAM L. GLENN, JR., SECRETARY, JERRY RAY, JAMES O.
HENRY, JR., BARHAM RHODES AND TAMMY SKAINS); ITS OFFICERS AND FORMER
OFFICERS (INCLUDING, BUT NOT LIMITED TO, ATTORNEYS; ACCOUNTANTS;
MANAGERS; SUBSIDIARIES; MANAGING GENERAL AGENTS; REPRESENTATIVES;
LOCAL RECORDING AGENTS; EMPLOYEES OR SERVANTS; STOCKHOLDERS; THIRD
PARTY ADMINISTRATORS; ADJUSTERS; MEMBERS; TRUSTEES; POLICYHOLDERS;
ASSOCIATES; AND THOSE ACTING IN CONCERT WITH THEM):
YOU AND EACH OF YOU ARE HEREBY DIRECTED AGAINST:
1.(a) Doing, operating, and conducting the insurance business of
DEFENDANT, or any other business of DEFENDANT, under any charter,
certificate of authority, license, permit, power or privilege belonging
to or heretofore issued by or to DEFENDANT, or exercising any direction,
control, or influence over said business of DEFENDANT;
1.(b) Wasting, disposing of, using, transferring, selling, assigning,
canceling, hypothecating, withdrawing, or allowing to be withdrawn, or
concealing, in any manner, any books,
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
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records, money, accounts, stocks, bonds, assets, notes, equipment, funds,
accounts receivable, policies of insurance or other property of
DEFENDANT, whether real, personal or mixed, of any kind or nature,
wherever situated, all of which property is hereby placed in custodia
legis, and title to such property is vested in the Receiver. Such
property includes any claims or causes of action, owned by, belonging to,
in the possession of, or claimed by DEFENDANT, that it might have against
any person, firm, association or corporation, all of which property is
hereby placed in custodia legis, and title to such property is vested in
the Receiver;
1.(c) Disposing of any account, debt, deposit, share account, trust
account, or any other asset, you may own, owe to, or hold for the benefit
of DEFENDANT, or any account held individually, jointly or severally for
DEFENDANT, whether such account, debt, deposit, share account, trust
account, or any other asset owned or held in the name of or for the
benefit of DEFENDANT, or under any other name, all of which property is
hereby placed in custodia legis, and title to such property is vested in
the Receiver;
1.(d) Removing from the jurisdiction of this Court, or from the place of
business of DEFENDANT, any office equipment, furniture, fixtures, books,
records or other property, of any kind or nature, whether real or
personal, wherever located, including, but not limited to, that which
has been acquired, purchased or paid for by DEFENDANT, all of which
property is hereby placed in custodia legis, and title to such property
is vested in the Receiver;
1.(e) Doing anything, directly or indirectly, to prevent the Permanent
Receiver or his designees from gaining access to, acquiring, examining or
investigating any books, documents, records or other materials concerning
DEFENDANT or its affairs and property under whatever name they may be
found. Such documentary material includes, but is not limited to,
records and property held by banks, savings and loan associations, trust
companies, credit unions or any other entity or depository institution;
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 4 of 13
<PAGE> 5
1.(f) Interfering, in any way, with the lawful acts of the Court's Permanent
Receiver or his designees, or with these proceedings, and from
commencing or prosecuting any action or appeal, including but not
limited to, arbitration including administrative proceedings, or from
obtaining any preference, judgment, attachment, garnishment, or other
lien, or the making of any levy against DEFENDANT, its assets or any
part thereof, and from asserting any claims against DEFENDANT, or
against the Permanent Receiver thereof, except by doing so in the
receivership proceedings herein; and,
1.(g) Interfering with any effort to determine the nature, amount and
location of any and all assets, books and/or records in any way
connected with the business of DEFENDANT.
YOU AND EACH OF YOU ARE FURTHER SPECIFICALLY ORDERED to make available
and disclose to the Permanent Receiver or his designees the nature, amount, and
location of any and all assets, property, and books and/or records of
DEFENDANT, and you are further ordered to immediately surrender all such
assets, property and books and/or records of DEFENDANT to the Permanent
Receiver or his agents.
2. Injunctions Against Financial Institutions
TO: ANY AND ALL BANKS (INCLUDING, BUT NOT LIMITED TO, COMPASS
BANK, HOUSTON, TEXAS, ACCOUNT NUMBERS 713-5149-1, 713-5150-5,
713-5152-1, TEXAS COMMERCE BANK-CHASE, HOUSTON, TEXAS, ACCOUNT
NUMBERS 017-00037275, 017-00037549, 017-00037531,
INTERSTATE/JOHNSON LANE, ATLANTA, GEORGIA, MONEY MARKET
ACCOUNT NUMBER 520-00371-77F; SAVINGS AND LOAN ASSOCIATIONS;
TRUST COMPANIES; CREDIT UNIONS; WELFARE TRUSTS; OR ANY OTHER
FINANCIAL OR DEPOSITORY INSTITUTIONS; YOU AND EACH OF YOU ARE
HEREBY DIRECTED AGAINST:
2.(a) Disposing of, converting, dissipating, using, releasing, transferring,
withdrawing, selling, assigning, canceling, hypothecating, allowing to
be withdrawn, or concealing, in any
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 5 OF 13
<PAGE> 6
manner, any property or assets of DEFENDANT, whether real, personal, or
mixed, and wherever located, or from disposing of any account, stock,
bonds, assets, debt, deposit, share account, funds, notes, trust account,
or any other asset that you may own, owe to or hold in the name of or for
the benefit of DEFENDANT, or any account, debt, share account, trust
account, or any other asset, whether owned or held individually, jointly
or severally for DEFENDANT, all of which property is placed in custodia
legis, and title to such property is vested in the Receiver;
2.(b) Transacting the business of DEFENDANT in any manner except through the
authority of the Permanent Receiver or his designees;
2.(c) Interfering, in any way, with the lawful acts of the Court's Permanent
Receiver or his designees, or with these proceedings, and from
commencing or prosecuting any action or appeal, including, but not
limited to, arbitration, administrative proceeding, or from obtaining
any preference, judgment, attachment, garnishment, or other lien, or the
making of any levy against DEFENDANT, its assets or any part thereof,
and from asserting any claims against DEFENDANT or against the Permanent
Receiver thereof, whether against or through DEFENDANT'S policyholders,
except by doing so in the receivership proceedings herein or pursuant to
the specific instructions of the Permanent Receiver or his designees; and
2.(d) Doing anything, directly or indirectly, to prevent the Permanent
Receiver or his designees from gaining access to, acquiring, examining,
or investigating any books, documents or records concerning DEFENDANT,
its affairs or assets, regardless of the name under which such assets,
documents, or records may be filed or wherever such books, documents or
records may be found. Such books, documents and records include, but are
not limited to, records of banks, savings and loan associations, trust
companies, or any other persons, firms, corporations, associations,
depositories, or other legal entities, as well as bank accounts, or any
other assets into which have been transferred, deposited or placed,
funds or other assets belonging to or payable to DEFENDANT, or to which
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 6 OF 13
<PAGE> 7
DEFENDANT may have claim or title regardless of under what name such
bank accounts, debts, deposits, share accounts, safe deposit boxes,
trust accounts or other assets are held except that you shall, on demand
of the Permanent Receiver and/or his designees, make available all of
the property and assets to them.
YOU AND EACH OF YOU ARE FURTHER SPECIFICALLY ORDERED to make available
and disclose to the Permanent Receiver or his designees the nature, amount, and
location of any and all assets, property, and books and/or records of
DEFENDANT, and you are further ordered to immediately surrender all such
assets, property and books and/or records of DEFENDANT to the Permanent
Receiver or his agents. This Court further specifically finds and orders that
the Permanent Receiver is vested by operation of law with title to the rights
of DEFENDANT as the customer of any financial institution.
3. Injunction Against All Other Parties
TO: ANY AND ALL OTHER PERSONS, ASSOCIATIONS, CORPORATIONS, OR
ANY OTHER LEGAL ENTITIES INCLUDING, BUT NOT LIMITED TO, THE
UNITED STATES POSTMASTER, POLICYHOLDERS, CLAIMANTS, AND ATTORNEYS
ASSERTING CLAIMS AGAINST PROFESSIONAL BENEFITS INSURANCE COMPANY
OR ITS INSUREDS:
YOU AND EACH OF YOU ARE HEREBY DIRECTED AGAINST:
3.(a) Disposing of, using, releasing, transferring, selling, withdrawing,
allowing to be withdrawn, assigning, canceling, hypothecating, or
concealing, in any manner, or in any way, any property of DEFENDANT,
including, but not limited to, any books, records, equipment, money,
accounts receivable, stocks, bonds, assets, policies of insurance,
notes, and funds of DEFENDANT, whether such property is real, personal,
or mixed, of any kind, or nature, wherever located, all of which
property is hereby placed in custodia legis, and title to such property
is vested in the Receiver;
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 7 OF 13
<PAGE> 8
3.(b) Disposing of any account, debt, deposit, share account, trust account, or
any other property you may own, owe to, or hold for the benefit of
DEFENDANT, or any account held individually, jointly, or severally for
DEFENDANT, whether such account, debt, deposit, share account, trust
account, or any other asset is owned, or held for DEFENDANT, in the name
of, or for the benefit of DEFENDANT, or under any other name, all of
which property is placed in custodia legis, and title to such property
is vested in the Receiver;
3.(c) Doing anything, directly or indirectly, to prevent the Permanent
Receiver or his designees from gaining access to, acquiring, examining
or investigating any books, documents, records or other material
concerning DEFENDANT or its affairs and property under whatever name
they may be found. Such documentary material shall include, but is not
limited to, records and property held by banks, savings and loan
associations, trust companies, credit unions or any other entity or
depository institution, as well as any bank accounts, or any other
assets into which have been transferred, deposited, and/or placed funds,
or other assets belonging to or payable to DEFENDANT, or to which
DEFENDANT may have claim or title regardless of under whose name such
accounts, debts, deposits, share accounts, safe deposit boxes, trust
accounts, or other assets are held;
3.(d) Interfering, in any way, with these proceedings or the lawful acts of
the Permanent Receiver or his designees, and from commencing, or
prosecuting any action or appeal or arbitration, including
administrative proceedings or obtaining any preference, judgment,
attachment, garnishment, or other lien, or from the making of any levy
against DEFENDANT, or against its property, or any part thereof, except
by doing so in the receivership proceedings herein, and from asserting
any claims against DEFENDANT, or against the Permanent Receiver thereof,
whether against or through DEFENDANT's policyholders, except in the
receivership proceedings herein; and,
3.(e) Transacting any business of DEFENDANT in any manner whatsoever.
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 8 OF 13
<PAGE> 9
YOU AND EACH OF YOU are further specifically ORDERED to make available and
disclose to the Permanent Receiver or his designees the nature, amount, and
location of any and all of the property of DEFENDANT, including, but not
limited to, any of the property listed in subparagraphs 3(a), 3(b) and 3(c)
above, and to immediately surrender all such property to the Permanent Receiver
or his designees.
III.
APPOINTMENT OF A PERMANENT RECEIVER
It is further ORDERED, ADJUDGED, and DECREED that the Commissioner of
Insurance of the State of Texas, P.O. Box 149104, Austin, Texas 78714-9104, be
and is hereby appointed as Permanent Receiver of DEFENDANT, and is granted the
following duties and powers:
1. The Permanent Receiver is authorized and directed to secure and to take
control and possession of all property, books, records, assets and other
items in the possession of or belonging to DEFENDANT as previously
described herein, of whatsoever nature and wheresoever located, including,
but not limited to, any statutory or special deposits made by or for
DEFENDANT with any officer or agency of any state or the federal
government, banks, savings and loan associations, and other depositories;
and any and all bank deposits, collateral or the contents of any safe
deposit boxes in the name of or belonging to DEFENDANT;
2. The Permanent Receiver and his designees are hereby granted and given all
powers and authority under any and all statutes and under the common law
of this State authorizing the appointment of a receiver, and particularly
all of the powers and authority granted in TEX. INS. CODE ANN. art. 21.28
et seq. and TEX. CIV. PRAC. & REM. CODE ANN. Section 64.001 et seq., and,
as representative of DEFENDANT, its policyholders, claimants and
creditors, see art. 21.28 (2)e to liquidate, rehabilitate, reinsure,
reorganize, conserve, protect, preserve, and recover any assets, books,
records, papers, property and other
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 9 OF 13
<PAGE> 10
items of DEFENDANT, including claims or causes of action belonging to or
that may have been asserted by DEFENDANT;
3. The Permanent Receiver appointed herein and his designees are authorized
and directed to reinsure, cancel contracts, reorganize, rehabilitate, and
conserve the affairs of DEFENDANT in this State, as the case may be;
4. The Permanent Receiver appointed herein and his designees are further
authorized and directed to file, prosecute and defend or settle any suit or
suits heretofore filed or which may hereafter be filed, by or against
DEFENDANT, deemed by said Permanent Receiver to be necessary to protect any
of the interested parties or any property affected thereby, and to preserve
the value of all property and assets of DEFENDANT for the benefit of the
receivership estate and its insureds;
5. Pursuant to TEX. INS. CODE ANN. art. 21.28, the Permanent Receiver
appointed herein and his designees are empowered to conduct the business of
DEFENDANT, to administer the business and operations of DEFENDANT, and to
employ and pay or compensate any of legal counsel, accountants, third party
administrators, clerks, and such assistants as they deem necessary, and to
authorize the payment of and to pay the administrative expenses of the
receivership estate out of the funds or assets of DEFENDANT in the
possession of the Permanent Receiver or coming into his possession;
6. It is ORDERED that the Permanent Receiver and his designees are authorized
to supervise, suspend, terminate, exclude, or dismiss any one or all of the
agents, managing general agents, employees, officers, and/or directors of
DEFENDANT, and to retain such necessary employees and agents, and to pay
their salaries and reasonable and necessary fees and expenses out of the
funds or assets of DEFENDANT which are in the possession of the Permanent
Receiver or coming into his possession. Such payments will be made as the
Permanent Receiver deems to be necessary in the enforcement of his duties;
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 10 of 13
<PAGE> 11
7. It is ORDERED that the Permanent Receiver and his designees are authorized
to take possession of and to remove from the premises of the DEFENDANT all
books, records, assets, equipment and any other items which relate to, or
are connected with, the business of DEFENDANT and which belong to, or are
in the possession of, DEFENDANT;
8. The Permanent Receiver appointed herein and his designees are authorized to
receive, collect, control, open and review all mail addressed in any manner
to DEFENDANT, arriving at the address of DEFENDANT, or intended for
DEFENDANT;
9. The Permanent Receiver appointed herein and his designees shall be
authorized to control and secure all property, books, records, assets and
other items of DEFENDANT, in any manner, as he believes is necessary and
appropriate, in his sole discretion;
10. The Permanent Receiver appointed herein and his designees are authorized to
exclude any and all persons from the premises of any property owned or
leased by DEFENDANT, who is interfering with the Permanent Receiver and his
designees in conducting their business, or for any other reason, at the
Permanent Receiver's and his designees' sole discretion.
The Court does not require the Commissioner of Insurance to file a bond as
permitted by TEX. INS. CODE ANN. art. 21.28 Section 2(d). The Commissioner of
Insurance has already filed an oath that he will faithfully perform the duties
of the Receiver in this cause, and the oath being filed, the Permanent Receiver
is fully qualified and empowered to take charge of all the assets and other
properties of DEFENDANT in the manner provided herein and to function as
Permanent Receiver immediately upon the entry of this Order.
IT IS FURTHER ORDERED that this Order directing the Permanent Receiver to
take possession and control of the affairs and assets of DEFENDANT shall
continue in full force and effect until further Order of this Court. This
Order shall also continue in full force and effect if and when a successor is
appointed to be the Commissioner of Insurance, and the new Commissioner of
Insurance shall automatically become the Permanent Receiver.
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 11 OF 13
<PAGE> 12
IT IS FURTHER ORDERED that the Permanent Receiver shall report to the
Court as required by TEX. INS. CODE art. 21.28.
IV.
OTHER ORDERS
It is further ORDERED, ADJUDGED and DECREED that anyone over the age of 18
who is not a party to nor interested in the outcome of this suit may serve all
citations, writs and notices in this cause.
No bond being required by the State of Texas, this Permanent Injunction
shall issue and become effective immediately, and the Commissioner of
Insurance, as Permanent Receiver, shall carry out his duties in accordance with
the terms of this Order.
It is further ORDERED that the State of Texas and the Attorney General of
Texas shall submit their claims for reasonable attorneys' fees and court costs
to the Permanent Receiver pursuant to TEX. CIV. PRAC. & REM. CODE ANN. Section
66.003 and TEX. GOV'T CODE Section 402.006 such claims shall be subject to the
provisions of TEX. INS. CODE ANN. art. 21.28, Sections 3 and 8.
It is further ORDERED that the Permanent Receiver shall receive, and take
possession of, all assets of DEFENDANT on deposit with any state or federal
agency.
It is further ORDERED that the Permanent Receiver and his designees are
authorized to negotiate and enter into one or more contracts to sell the
charter and any related rights of DEFENDANT, on terms acceptable to him in his
sound discretion, and to consummate such sale(s) upon and subject to the
approval of this Court pursuant to hearing in this receivership case and of the
Texas Department of Insurance, with this Court further retaining jurisdiction
to determine all rights, titles, liens, and interests in such charter(s) and
related rights and likewise in any proceeds of sale(s).
It is further ORDERED by the Court that the Receiver provide the Texas
Life, Accident, Health and Hospital Insurance Service Guaranty Association
access to all books, documents,
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 12 OF 13
<PAGE> 13
records, or other materials necessary for the processing and payment of
claims for which it is statutorily responsible.
All of the foregoing is subject to further orders of this Court.
SIGNED at Austin, Travis County, Texas, on this the 23 day of
June 1998 at 1:18 o'clock p.m.
/s/ Illegible
-----------------------------
JUDGE PRESIDING
PROPER NOTICE GIVEN.
ACKNOWLEDGMENT OF NOTICE AND WAIVER
OF OBJECTION PRESENTED.
HEARING HELD
RECOMMENDED
SIGNED ON 23RD DAY OF JUNE, 1998
/s/ Tom Collins
- ----------------------------------------
TOM COLLINS, RECEIVERSHIP SPECIAL MASTER
PERMANENT INJUNCTION, AND
ORDER APPOINTING PERMANENT RECEIVER
PAGE 13 OF 13
<PAGE> 1
PROFESSIONAL BENEFITS INSURANCE COMPANY IN RECEIVERSHIP
909 N.E. LOOP 410, SUITE 632
SAN ANTONIO, TX 78209
Phone (210) 826-0003 Facsimile (210) 826-3504
- --------------------------------------------------------------------------------
TO ALL POTENTIAL CREDITORS OF PROFESSIONAL BENEFITS INSURANCE COMPANY (PBIC)
RE: The State of Texas vs. Professional Benefits Life Insurance Company
(PBIC): Cause No. 98-04500, in the 201st Judicial District Court of Travis
County, Texas
Please be advised that the above court entered a Temporary Restraining Order
against Professional Benefits Insurance Company (PBIC) on April 30, 1998 placing
the company in receivership. The Commissioner of Insurance, as Receiver, has
designated Ernesto Garza, as the Special Deputy Receiver (SDR) to conduct the
business of the company. PBIC was licensed to write business in Arizona,
Nebraska, New Mexico, Oklahoma, South Dakota and Texas.
All policies issued to residents of the above indicated states that were in
force as of April 30, 1998 have been assumed by the guaranty association in the
state where the policyholder resides. All policies issued to residents of
other states that were in force as of April 30, 1998 have been assumed by the
Texas guaranty association. Should you have any questions regarding coverage or
continuation of benefits, please contact your guaranty association whose
address and phone appear on Attachment 1 to this notice. You should have your
policy number and/or certificate number available for reference.
Claims other than those covered by the guaranty associations or in excess of
the guaranty association limits will be handled by the Special Deputy Receiver
of PBIC, and will require a proof of claim. Such claims include but are not
limited to: claims of vendors, service providers, employee wage claims,
stockholders, or other general creditors. These proceedings are governed by
Texas Ins. Code Article 21.28.
The receivership court has set a CLAIM FILING DEADLINE of 5:00 p.m.,
C.S.T., January 29, 1999. Accordingly, any and all claims by policyholders or
creditors must be presented or post-marked to the SDR at 909 N.E. Loop 410,
Suite 632, San Antonio, Texas 78209 on or before January 29, 1999. To receive
further consideration of your claim, a Proof of Claim form, a copy of which is
attached, must be filed. Additional forms may be requested by contacting the
office of the SDR by telephone at (210) 826-0003 or by fax at (210) 826-3504. We
regret any difficulties that this situation may have caused you. If you have
any questions about this notice please contact our office. If you have any
questions about continuation of coverage please contact your guaranty
association.
Yours truly,
Ernesto Garza
Special Deputy Receiver for
Professional Benefits Insurance Company in Receivership
<PAGE> 2
IMPORTANT - READ CAREFULLY
NOTICE OF RECEIVERSHIP AND PROOF OF CLAIM FILING DEADLINE
On April 30, 1998, Professional Benefits Insurance Company (PBIC) was placed in
temporary receivership by order of the 201st Judicial District Court of Travis
County, Texas and on June 22, 1998 was placed in permanent receivership. The
Texas Commissioner of Insurance, Elton Bomer, has been appointed Receiver. The
Commissioner has delegated his authority as Receiver to Special Deputy Receiver
Ernesto Garza. Some guaranty associates will review claims of resident
claimants and will consider those claims that are within their statutory
authority. The receivership's assets are used to pay approved non-covered claims
in accordance with art. 21.28 of the Texas Insurance Code. The purpose of this
notice is to notify you of the receivership procedure, and to provide you with
instructions for filing your Proof of Claim with the Special Deputy Receiver.
PROCEDURE FOR FILING PROOF OF CLAIM FORM:
1. If you have a claim pending against PBIC, you need to file the Proof of
Claim form.
2. In the event the Special Deputy Receiver denies your claim, in whole or in
part, you are entitled to appeal the denial by filing suit in the 201st
Judicial District Court of Travis County, Texas.
3. If you have any questions about filing this Proof of Claim form, you may
contact the Special Deputy Receiver at (210) 826-0003.
4. THE PROOF OF CLAIM FILING DEADLINE IS 5:00 PM CST, JANUARY 29, 1999.
PLEASE FOLLOW THESE INSTRUCTIONS IN COMPLETING THE ENCLOSED PROOF OF CLAIM FORM:
o Indicate the type of claim and amount, if known, by checking the
appropriate category and indicating the amount.
o Vendors of PBIC making claims for unpaid goods provided or services
rendered should check box 5 on the Proof of Claim form. You must include a
copy of the original written contract (or a description of the agreement)
and detailed invoices.
o If the amount of a claim is unknown, you must still file the Proof of
Claim by the Proof of Claim filing deadline. Insert the words "unstated
amount" in the amount column.
o If you have assigned your right of recovery, you must indicate the
assignee's name and address and attach a copy of the Assignment.
o During the course of the receivership proceedings, you must notify the
Special Deputy Receiver in writing of any mailing address and telephone
number changes.
o Persons filing this claim must provide their social security numbers,
phone numbers, sign and date the Proof of Claim and have all signatures
notarized. Claims filed by corporations must be signed by an authorized
representative of the company. Please state the capacity of the signatory.
you must provide your attorney's name and address, if applicable.
o If you fail to adequately describe and document your claim, your Proof of
Claim may be rejected.
o To reduce expense, receipt of the Proof of Claim form is not acknowledged.
o You will receive notice of the decision of the Special Deputy Receiver
when the proof of claim is processed.
o You must disclose all cash, premium funds or accounts, securities, trust
funds, letters of credit, or other assets of PBIC which you hold or over
which you exercise any control.
ALL PROOF OF CLAIM FORMS MUST BE POST-MARKED BEFORE 5:00 PM CST ON
JANUARY 29, 1999 AND PRESENTED TO:
PROFESSIONAL BENEFITS INSURANCE COMPANY, IN RECEIVERSHIP
Ernesto Garza, Special Deputy Receiver
909 N. E. Loop 410, Suite 632
San Antonio, TX 78209
Tel (210) 826-8003 Fax (210) 826-3584
<PAGE> 3
GUARANTY ASSOCIATIONS
You may contact the following entities if you have questions regarding coverage
or continuation of benefits and you are a resident of:
Texas, Oklahoma, Arizona and any state other than New Mexico:
LaShelle, Coffman & Boles, Ltd.
301 Congress Avenue, Suite 500
Austin, Texas 78701
Phone: (512) 499-0004
Fax: (512) 472-1470
New Mexico:
New Mexico Life and Health Insurance Guaranty Association
P.O. Box 13449
Albuquerque, New Mexico 87192-3449
Phone: (505) 237-9397
Fax: (505) 237-9496
Attachment 1
<PAGE> 4
===============================================================================
PROOF OF CLAIM
IN REGARD TO
PROFESSIONAL BENEFITS INSURANCE COMPANY
IN RECEIVERSHIP
===============================================================================
READ THE ENCLOSED INSTRUCTION SHEET CAREFULLY BEFORE COMPLETING THIS FORM
THE DEADLINE FOR FILING YOUR PROOF OF CLAIM IS 5:00 PM C.S.T., JANUARY 29, 1999.
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
CLAIMANT'S NAME & ADDRESS IF REPRESENTED BY AN ATTORNEY, PLEASE COMPLETE THIS SECTION ALSO.
(PLEASE PRINT) (PLEASE PRINT)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
NAME NAME OF ATTORNEY
- -------------------------------------------------------------------------------------------------------------------
MAILING ADDRESS MAILING ADDRESS
- -------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE CITY STATE ZIP CODE
- -------------------------------------------------------------------------------------------------------------------
HOME PHONE WORK PHONE SOCIAL SECURITY # PHONE NUMBER
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST NOTIFY THE SPECIAL DEPUTY RECEIVER OF ANY CHANGES IN YOUR ADDRESS OR
PHONE NUMBER.
<TABLE>
<CAPTION>
<S> <C> <C>
Claim is for:
Check the appropriate box below: Claim amount
------------
1) [ ] Unpaid wages of a former employee of the company.................................. $
------------
2) [ ] State Insurance Department........................................................ $
------------
3) [ ] Insurance Guaranty Association.................................................... $
------------
4) [ ] Claim is made by an insurance agent for unpaid commissions or invoices............ $
------------
5) [ ] Claim is made by a vendor or creditor for unpaid goods and services............... $
------------
6) [ ] Stockholder....................................................................... $
------------
7) [ ] Other claim....................................................................... $
------------
Describe:
-------------------------------------------------------------------------
TOTAL AMOUNT OF CLAIM (if the amount of claim is unknown at this time,
insert the words "unstated amount").................................................... $
------------
</TABLE>
Describe the nature of your claim:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Page 1 of 2)
<PAGE> 5
If your loss may be covered by any other insurance, please identify the
Insurance company and policy number
Insurance company Policy number
----------------------- ------------------------
Do you hold or exercise any control over any cash, securities, trust funds,
letters of credit, or other assets of Professional Benefit Insurance Company? if
yes, describe below
- -----------------------------------------------------------------------------
- -----------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Has a LAWSUIT or other Legal Action been instituted? Yes [ ] No [ ] If yes please provide the following information:
1. Court where filed 2. Case number and Date filed
--------------------------------------- --------------------------
3. Plaintiff(s): 4. Defendant(s)
-------------------------------------------- -----------------------------------------
</TABLE>
ATTACH DOCUMENTATION TO SUPPORT YOUR CLAIM
- ------------------------------------------
Note: If you are filing a death claim, please send a certified copy of the
death certificate.
Note: If you want to cancel your policy and receive the cash surrender value,
please complete and return the form titled: "Surrender of Policy".
AFFIRMATION OF CLAIMANT
- -----------------------
I affirm that I have read the foregoing Proof of Claim and understand the
contents thereof, that the claim of $_______ against PBIC is justly owing to me;
that I alone am entitled to file this claim, except as stated above, that there
is no setoff to the claim thereto, except as stated above; that the matters set
forth above and any accompanying statements and documents are true to my own
knowledge, and that no payment of/or on account of the aforesaid claim has been
made, except as stated above.
- ------------------- -------------------------------------
DATE SIGNED SIGNATURE OF PERSON MAKING CLAIM
-------------------------------------
TITLE (IF APPLICABLE)
SUBSCRIBED AND SWORN TO BEFORE ME, THIS DAY OF , 19 .
------ ------ ----
-------------------------------------
SIGNATURE OF NOTARY PUBLIC
CLAIMANT - PLEASE DO NOT COMPLETE BELOW THIS LINE
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL DEPUTY RECEIVER
- --------------------------------------------------------
<S> <C>
Amount approved - Class 1 $ .
- --------------------------------------------------------
Amount approved - Class 2 $ .
- --------------------------------------------------------
Amount approved - Class 3 $ .
- --------------------------------------------------------
Amount approved - Class 4/Class 5 $ .
- --------------------------------------------------------
Amount rejected, in whole or in part $ .
- --------------------------------------------------------
Total credits of GA approved $ .
- --------------------------------------------------------
</TABLE>
- -----------------------------------------------------------
Signature and date - Special Deputy Receiver Representative
(Page 2 of 2)
