Prime Travel Protection trustee: We’ll pay claims “to the greatest possible extent”

A trustee for bankrupt Prime Travel Protection, which sold what Florida investigators say was illegal insurance through a network of travel agencies, has promised to pay claims “to the greatest possible” over a three-year period.

In a letter sent last week to holders of approved claims issued by both Traveler Protection Services and Prime Travel Protection, travelers whose contracts haven’t been approved, and contract holders who have not traveled yet, a trustee for the liquidated company says although there isn’t enough money to cover all claims, a company principal has committed to “a series of capital contributions” to cover them.

Here’s the letter in its entirety, which was sent to me by a travel agency that sold Prime Travel Protection policies:

Ladies and Gentlemen,

Please be advised that Prime Travel Protection, Inc., a Colorado corporation, and Universal Assurance Group, Ltd., a Colorado corporation, have terminated active business operations as of January 26, 2009. Both companies are continuing business only to process, and to the extent possible, to pay claims which meet the criteria set out in the applicable contracts issued by Prime Travel Protection, Inc. and Traveler Protection Services, Inc. As of the date set forth in this paragraph, no new contracts have been issued by Prime Travel Protection, Inc.

By way of background, in 2007, Traveler Protection Services, Inc., an Illinois corporation, ceased active business operations and Prime Travel Protection, Inc, purchased the assets and assumed all, or substantially all, of the liability for contracts theretofore issued by Traveler Protection Services, Inc. At present, we are facing the situation that there are insufficient corporate funds in Prime Travel Protection, Inc. to pay all approved claims at this juncture and to establish sufficient reserves to pay all pending claims which have not yet been approved to-date.

In order to augment the financial resources available to Prime Travel Protection, Inc. to compensate its customers in accordance with its contractual obligations, Mr. Jerry Watson, a principal of both Traveler Protection Services, Inc. and Prime Travel Protection, Inc., has committed to make a series of capital contributions to Prime Travel Protection, Inc. over a sixty month period. Traveler Protection Services, Inc. is evaluating various possible claims against third parties to realize additional funds available for distribution to claimants. Mr. Watson will receive no compensation during the period in which the exclusive focus of Prime Travel Protection, Inc. is the repayment of its customers.

With respect to those persons who hold approved claims as of the date of this letter, it is the objective of Prime Traveler Protection, Inc. to repay such claims to the greatest possible extent over the initial three years of the five year capital contribution commitment which has been made by Mr. Jerry Watson. If you are the holder of an approved claim, there is no need to submit any further documentation to Prime Traveler Protection Services, Inc. The claims will be paid in the order in which they were received by Prime Travel Protection, Inc. or Traveler Protection Services, Inc., that is, the oldest claims will be paid first.

With respect to those persons who have submitted claims which have not yet been approved as of the date of this letter, the intent of Prime Travel Protection, Inc. is to repay such claims to the greatest extent possible during the final two years of the five year capital contribution commitment which has been made by Mr. Jerry Watson. Again, the oldest claims submitted will be paid first. Since additional documentation may be required to pay pending claims, you may be contacted by Prime Travel Protection, Inc. to submit additional materials to substantiate or clarify the claims you have tendered.

Lastly, with respect to those persons who have purchased contracts from Prime Travel Protection, Inc. or Travel Protection Services, Inc. and who have not yet traveled or have completed their trips but not yet submitted claims, it is the objective of the company to (1) cooperate with the travel agencies who issued the subject contracts to obtain substitute travel protection coverage for customers who have not commenced their trips, and the extent that obtaining substitute coverage is not possible (2) to evaluate any future claims in the ordinary course of business and pay such claims during the final two years of the recapitalization plan.

Please direct any correspondence to: Prime Travel Protection, Inc.,

ATTN: Counsel, 7450 W. 52nd Avenue, Suite 336-M Arvada, CO 80002.

We appreciate your patience as the company seeks to make good on its business obligations. Thank you.

Sincerely,

Trustee for Prime Travel Protection, Inc./Universal Assurance Group, Ltd./Traveler Protection Services, Inc.

Is this genuine effort to repay hundreds, if not thousands, of claims? Or an attempt to thwart a class-action lawsuit against Prime Travel Protection’s principals and the agents who sold its policies?

What do you think?


Florida confirms “active and ongoing” investigation of travel agencies that sold Prime Travel Protection

Florida’s Department of Financial Services has confirmed it is investigating travel agencies that sold insurance underwritten by Prime Travel Protection, a Colorado company that filed for bankruptcy protection last month and left thousands of travelers uninsured.

Prime Travel Protection sought to circumvent state regulations by claiming it wasn’t insurance. Jerry Watson, the company’s president, said Prime Travel Protection’s policies were “not an insurance product” and didn’t need to be licensed.

Florida authorities disagree. “This product was claimed to be insurance,” said Nina Banister, a spokeswoman for Florida’s Department of Financial Services. “It does not appear that Prime Travel Protection was an authorized entity. We’re looking for agents who were involved in selling it.”

Under Florida Statutes, any agency or agent selling unauthorized insurance faces fines and a possible suspension of license:

Any person who knowingly transacts insurance or otherwise engages in insurance activities in this state without a license in violation of this section commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

Banister says Florida wants to hear from anyone who bought a Prime Travel Protection policy through a travel agency in the United States. She asks that they either call Florida’s consumer help line at (877) 693-5236 or (850) 413-3030, or fill out a complaint online.

The investigation, which appears to be in its early stages, could affect hundreds of travel agencies and thousands of travelers.

According to numerous customers, travel agencies falsely represented the Prime Travel Protection product as travel insurance. Travel agents claim that they believed Prime Travel Protection to be legitimate insurance, and that they immediately stopped selling its policies when they learned it was an unlicensed insurance product.

But Florida authorities are conducting a thorough investigation, and are interested in hearing from travelers who bought policies through other defunct travel insurance companies Watson was involved with, including Trip Assured, Vacation Protection Services and Travelers Protection Services. The punishment for travel agencies who sold those insurance policies and then continued to sell Prime Travel Protection could be severe.

“There is no statute of limitation on this,” Banister said.