Kemper In Runoff Still Plays Hardball

By Daniel Hays

NU Online News Service, Aug. 20, 3:18 p.m.EDT?The tough tactics used for the runoff of KemperInsurance Companies are still continuing despite a change inmanagement, according to interested parties.[@@]

Kemper announced two weeks ago that by mutual consent it wasterminating the runoff contract with Kenning Financial Advisors andthat Kenning Chief Executive Officer Michael Coutu, who was alsoserving as Kemper acting CEO and CFO, had resigned.

The change, however, has done little to help the widows andorphans of dead workers, amputees and others who are seekingcompensation for workplace accidents at an Indiana steel plant,which had a Kemper surety bond to back up its self-insured workers'compensation program.

Kemper is currently in court arguing that the $3 million bonddoes not cover 96 former Bethlehem Steel employees who were injuredon the job before Sept. 1, 2000 and after Sept. 1, 2001, and whohave been left with no medical benefits or compensation payments.Bethlehem filed for bankruptcy on April 30, 2003.

Krysten Lester, a procedure analyst for the Indiana Workers'Compensation Board, said when the board learned of the change inmanagement at Kemper, it had put out feelers to see if the companywould offer a settlement, but "they haven't acted like they wereinterested."

In court papers, Kemper contends that the board misread theperiod of coverage in the bond agreement.

Oral arguments over the issue have been scheduled for Sept. 20at the Indiana Court of Appeals in Indianapolis.

Kemper, when it terminated its contract with Mr. Coutu, put outa statement that some unnamed members of "the Kenning team" wereremaining to assist in the ongoing runoff. The selection of a newCEO for Kemper is still in process.

Linda Kingman, spokeswoman for Long Grove, Ill.-based Kemper,said that the company board in consultation with Illinois insuranceregulators is still interviewing potential CEO candidates.

Before Mr. Coutu and the Kenning firm's departure, policyholdershad complained that Kemper was rejecting millions in claims,seeking money for costs that went back many years, and had endeddividend payments.

In reaction, the Marsh brokerage advised its Kemper clients in aletter to "consult with legal counsel."

The brokerage also warned policyholders that the Kenning-managedKemper, in addition to other moves, might try to convince insuredsto "accept a settlement at less than what you perceive is fairvalue."

According to a policyholder who declined to be named, prior tothe Kenning contract termination Illinois regulators met with Marshand also heard complaints from major policyholders. A spokespersonwith the Illinois Department of Financial and ProfessionalRegulation, which contains the insurance division, refused toconfirm or deny if the contacts took place.

Asked why she could not say whether a meeting took place, ClairThorpe said, "details of a runoff plan are confidential."

Kemper Chairman David B. Mathis said when the Kenningtermination was announced, "We asked Mike Coutu to map out arun-off plan for Kemper, and he has done that with the concurrenceof the Illinois Division of Insurance and certain other states asmembers of the National Association of Insurance Commissioners.

"Our policyholders were fortunate to have Mike's leadership atrecent critical times for our company, and we are grateful for allhis contributions and the experience and expertise that he andKenning brought to us. As we move deeper into implementing the planhe developed, Mike and the board of directors agreed that it was agood time for transition."