AIK Comp Advisory
AIK COMP UPDATE - Summary of Implementation of Modified Reorganization and Assessment Plan
Over the last few weeks, a number of very important developments have taken place in the AIK Comp f/k/a Associated Industries of Kentucky Selective Self-Insurance Rehabilitation proceeding. Following the conclusion of successful negotiations between the Rehabilitator and Group Member Intervenors (including the FBT Group) on October 3, 2005, a settlement agreement was reached between the respective parties. On November 9, 2005, the Franklin Circuit Court approved the settlement terms. Accordingly, the Rehabilitator has begun to implement a Modified 2005 Reorganization Plan (“Amended Plan”) which includes an amended 2005 assessment.
The new assessment amount of $90,775,754 will replace all previously issued assessments (all assessment monies previously paid by a Group Member will be credited against the new assessment amount). As a direct consequence of the October 3, 2005 settlement agreement, the Rehabilitator can rely on a significant infusion of tangible assets (both cash and interest bearing notes) into the estate of AIK Comp. Accordingly, the Rehabilitator has agreed to discount reserves by four-and-one-half percent (4.5%). The discounted reserves mean that the current $90,775,754 amount is approximately $6.5 million less than the Rehabilitator’s June 2005 assessment.
The Rehabilitator mailed assessment invoices to all assessed Group Members on November 8, 2005. All assessed Group Members are required to satisfy eighty percent (80%) of their pro-rata share of the assessment in cash, and execute contingent “callable” promissory notes for the remaining twenty percent (20%). Unless a Group Member qualifies for a hardship payment plan, the requisite payment (and delivery of promissory notes) must be completed within sixty (60) days of the Rehabilitator’s mailing of the assessment invoices.
The Rehabilitator will provide a hardship payment plan application to all interested AIK Comp Group Members. The Amended Plan recognizes two (2) categories of “hardship” circumstances: (1) Undue Hardship; and (2) Cash Flow Hardship. To be exempt form the obligation to pay its pro-rata share of the cash assessment by the Due Date, a Group Member must apply for a hardship payment plan by filing the aforementioned application within thirty (30) days of receipt of the assessment invoice. A Group Member will be presumed to have “received” their assessment invoice three (3) days after the Rehabilitator’s mailing.
Likewise, a Group Member must file individual objections regarding erroneous assessment calculations, retro policies, and short-rate premiums within thirty (30) days of their receipt of an assessment invoice. All individual objections must first be addressed with the Rehabilitator and if not resolved, shall be presented for a hearing before the Franklin Circuit Court.
Group Members who do not satisfy their assessment obligations (and who are not tendering payment under an approved hardship payment plan), will not be entitled to any share of third-party recoveries. Such Group Members will owe interest at the rate of one percent (1%) per month after the ninety-first (91st) day following the mailing of the invoice. All expenses and costs of collection, including attorneys’ fees, will be assessed against the delinquent Group Member. Additionally, delinquent Group Members may be subject to all penalties and forfeiture of rights provided under the AIK Comp Bylaws and contracts. Lastly, Group Members who do not satisfy their assessment obligations in a timely manner will not have their joint and several liability released until there is a transfer of the liabilities and assets of AIK Comp to a third party—who can then release the liability for all.
Frost Brown Todd LLC (“FBT”) is currently representing the interests of one hundred and nineteen (119) AIK Comp Members in the Rehabilitation. The FBT Group will also be assisting group members with individual objections and the application/presentation of applications for hardship. The FBT Group will be conducting a number of Q & A sessions with regard to AIK Comp and insurance risk.