The workers’ compensation insurance industry is assessing the news that Patriot National Inc. made a Chapter 11 filing in the U.S. Bankruptcy Court for the District of Delaware on Jan. 30.
Patriot National is an independent national provider of comprehensive full-service outsourcing solutions within the worker’s compensation insurance marketplace for insurance companies, employers, local governments and reinsurance captives. Steven Mariano founded Patriot National in 2013 and took it public in early 2015. It is based in Fort Lauderdale, Fla.
The company works with leading insurance carriers to design workers’ compensation programs according to their preferred risk parameters and specifications. In turn, these customized insurance programs are marketed through a broad distribution network of over 1,000 independent retail agencies. While the firm plays a central role in the underwriting, production and administration process, revenue for its services is fee-based and they do not write any insurance policies or bear underwriting risk.
Patriot National also offers additional services to insurance carriers and other clients such as employers, local governments and reinsurance captives, including claims administration and adjudication, cost containment, nurse care management, fraud investigation, and subrogation services.
The company’s financial troubles are linked to sister-company Guarantee Insurance Company (“GIC”), a workers’ compensation insurance company that went into liquidation in Florida on November 27, 2017.
GIC was licensed in 40 states and the District of Columbia. It wrote business in 31 states and the District of Columbia at the time of liquidation.
The states other than Florida where GIC had in-force polices at the time of liquidation are Alabama, Arkansas, Colorado, Delaware, the District of Columbia, Georgia, Idaho, Indiana, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, and West Virginia.
GIC had approximately 8,600 active policies as of November 13, 2017, including 1,250 in Florida. Under the liquidation order, all GIC policies are cancelled effective on December 27, 2017, unless otherwise terminated prior to that date. The claim filing deadline is May 29, 2018.
Chapter 11 of the Bankruptcy Code generally provides a path to corporate reorganization. The debtor typically proposes a plan to keep its business active while attempting to pay creditors over time.
Patriot National announced a restructuring plan in November, in which lead lenders Cerberus Business Finance, LLC and TCW Asset Management Co. LLC., agreed to acquire the firm.
Implications for Insurance Defense Law Firms
According to The American Lawyer, nine law firms are among the top 20 creditors listed in the bankruptcy filing. A total of $3.8 million in legal fees is owed to:
- Kasowitz Benson Torres, $1.1 million
- Simpson Thacher, $149,000
- Greenberg Traurig, $779,230
- Conrad & Scherer, $698,020
- Perkins Coie, $374,048
- Berger Singerman, $337,917
- Cahill Gordon & Reindel, $127,505
- Littler Mendelson, $127,252
- Willkie Farr & Gallagher, $112,217
Simpson Thacher and Kasowitz are also involved in separate litigation matters, in which Patriot National founder Steven Mariano alleges that actions taken by the two firms contributed to the firm’s financial distress.
Workers’ compensation panel counsel law firms that worked with Patriot National or GIC may see a temporary burst of activity as a result of the bankruptcy filing, followed by a decline in claims files. While the situation had been unfolding for some time, the defense firms that have not protected themselves by searching for replacement clients will be scrambling to do so now.
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