Utah judge: Sentinel Security is back in business until May 12 trial start

A Utah judge paused an emergency order banning Sentinel Security Life Insurance Co. from writing new business nationwide.

Judge Donald H. Hansen paused the order after a South Carolina judge reversed a similar order last month against Atlantic Coast Life Insurance Co. Both insurers are owned by Advantage Capital Partners, known as A-Cap.

Under Hansen’s directive, the prohibition on new policy business is stayed pending the outcome of a trial set to start May 12. That appeal by A-Cap had been scheduled for March 10, but was rescheduled.

“All prohibitions contained in the Emergency Order, including the prohibition on the Companies’ ability to write new business … are hereby held in abeyance, shall not be enforced while this stay remains in effect and no other directives or orders shall be issued that undermine this Order, until resolution of this case,” Hansen wrote.

Sentinel Security stopped writing new policies while the A-Cap appeal was pending. With the stay granted, Sentinel Security is back in business. An A-Cap spokesman sent InsuranceNewsNet the following statement:

“While there have been sales in both states—with South Carolina operations never having been interrupted—we are planning to launch a targeted roll-out initiative in the near term. We're grateful for the continued support of our distribution partners who have remained enthusiastic about working with us throughout this process. A-CAP remains committed to full transparency with regulators as we cooperate to address all outstanding matters.

A hearing on the Utah Emergency Order is scheduled for May 12, and we anticipate resolution on the valuation matters at that time, if not before. We stand firmly behind our valuations, which have been substantiated by highly regarded, independent valuation experts, and we remain confident in the financial strength of our company."

Joint effort

South Carolina and Utah regulators shared information as they probed the financials of both A-Cap insurers throughout 2024, court documents say.

In South Carolina, Michael Wise, director of the South Carolina Department of Insurance, issued an April 10, 2024 “confidential order” placing Atlantic Coast and Southern Atlantic Re into “confidential administrative supervision,” court documents say.

On Oct. 21, a directive informed the insurance companies that South Carolina was “unwilling to continue to permit the insurers to incur new liabilities ...  when all companies[’] RBC are at a mandatory control level and each of the insurers exhibits negative surplus.”

South Carolina regulators directed Atlantic Coast to cease writing new business on Nov. 14, court documents say. Utah made its directive official on Dec. 2 and South Carolina followed on Dec. 11.

Things changed on Feb. 13 when South Carolina Administrative Law Judge Ralph King Anderson III sided with A-Cap.

Anderson rebuked regulators and rejected the SC insurance department’s conclusion that Atlantic Coast is in financial distress.

“The evidence shows that ACL maintains a positive cash flow and has not experienced any difficulty paying amounts owed to either its policyholders or creditors,” he wrote.

In a scathing 24-page decision, Anderson criticized the department’s process for moving ahead with its directive despite Atlantic Coast's good faith efforts. The judge wrote that the results financially damaged the insurance companies.

The directive “has tarnished Petitioners’ credibility in the market, resulting in a loss of employees, and damaged relations with its brokerage distribution and amongst local funeral homes,” Anderson wrote. “Moreover, policyholders have sought recoupment of premiums, resulting in financial loss to the public.”

South Carolina regulators have not decided on a response to Anderson’s decision, a spokeswoman said this week.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.