Merit Casualty Company Liquidated

Chicago, IL The Cook County Circuit Court issued an Order of Liquidation with a finding of insolvency against Merit Casualty Company, Chicago, on April 1, 1997, in response to a verified complaint filed by Illinois Insurance Director Mark Boozell. Licensed in seven states, Merit Casualty primarily wrote nonstandard auto, garage keepers' general liability and dram shop coverages until it was placed in rehabilitation on December 19, 1994.

A Rehabilitation Plan entered by the court on January 11, 1995, contemplated, among other things, that: Merit Casualty would cease writing insurance; investors would infuse capital into the parent company, Merit Financial Corporation, to create and fund an affiliated insurance company, Merit Insurance Company; and the infused capital, together with earnings from existing affiliated entities, would fund the runoff of Merit Casualty's business. However, because revenues transferred to Merit Casualty have been insufficient to cover the volume and magnitude of policyholder claims, claim related expenses and other obligations, the Director concluded that liquidation was the most prudent course of action.

The Illinois Insurance Guaranty Fund and similar funds in other states will be responsible, within statutory limits, for the covered claims of and against Merit Casualty's policyholders. Merit Insurance Company was sold to Pembridge Insurance Services Corp. on December 31, 1996, and is unaffected by the liquidation.

Liquidation proceedings are being handled by the Director's Office of the Special Deputy, 222 Merchandise Mart Plaza, Suite 1450, Chicago, IL 60654; (312) 836-9500.