Pub. 2 2012 Issue 2

19 I recently earned another “honorary degree” from the school of hard knocks. Acquiring this B.S. (not Bachelor of Science), required using a lot of big words like Insolvency, Co-mingling of Funds, and Liquidator, who it turns out is sort of like the Terminator. It started with a letter arriving at my office at FSG from the Third Judicial District Court in Utah: WESTERN INSURANCE COMPANY NOTICE OF ISSUANCE OF LIQUIDATION ORDER. It was quite a contrast to my first meeting with Western In- surance Company (WIC), less than five years before to discuss a possible business relationship. At the time, they sported an impressive A.M. Best rating of A- (Excellent). The relationship involved FSG insuring mechanical breakdown service contracts for auto dealers, and the first thing I did was to insist that all mon- ies flow directly from the dealers to FSG. Fronting fees would be remitted to WIC and the premium would go straight into a segregated trust account held by a dealer-owned reinsurance com- pany, one with its own Tax ID and managed by a non-affiliated bank. We hammered out the agreement. Four years later WIC was declared insolvent. By then we had set up on behalf of our dealer-clients 17 separate reinsurance cus- todial trust accounts totaling millions of dollars. What would be the fate of these accounts? Might they be added toWIC’s general assets? Would our clients be made to circle around with other claimants like sharks, waiting for the almighty Liquidator to dole out the next morsel? How to Avoid Swimming with the Sharks BY GARY VUCEKOVICH , PRESIDENT, FORESIGHT SERVICES GROUP  swimming with sharks — continued on page 20