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Snell& Wilmer <br />L.L.P. <br />Mr. Mike Long <br />May 4, 2001 <br />Page 2 <br />On April 14, 2001, Poivderhorn received a second Notice of Violation from the Division <br />with respect to the Bond. The Division based the NOV on a finding that [he Colorado <br />Commissioner of Insurance had suspended Frontier's Certificate of Authority to "solicit or issue <br />new or renewal insurance business in Colorado." The NOV requires Powderhom to replace the <br />Bond on or before May 14, 2001. <br />By this letter, Powderhom requests a hearing on NOV 2001-005 at the Board's May <br />meeting, responds to the NOV and seeks an extension of time in which to abate the NOV. As set <br />forth below, although the Division is in error for a number of reasons for having issued the <br />NOVs, Powderhom respectfully submits that Frontier's loss of authorization in Colorado does <br />not constitute a violation by Powderhom nor does it affect the validity of the Frontier surety <br />given the cessation of active mineral production a[ [he Powderhor mine. Furthermore, and <br />perhaps even more fundamental to this complaint, it appears as though the Division has assumed, <br />without analysis, that the Frontier surety as amended by the highly rated National Insurance <br />Company reinsurance agreement, is insufficient. The Division must first make this <br />determination before it can conclude that the surety is inadequate. Upon preparing such an <br />analysis, Powderhom and Frontier must be accorded the opportunity to review and comment on <br />[he methods and results of the analysis. <br />Powderhom further requests that NOV 2001-005 be merged into NOV 2000-010, since <br />the two NOVs are duplicative, allege the same violation (lack of adequate surety) and demand <br />the same relief. In the even[ the Board does not merge the NOVs, Powderhor requests that they <br />be consolidated for administrative purposes and that it be granted through May 31, 2001, to <br />resolve the issues identified by the Division, which is the date through which the abatement <br />period for NOV 2000-010 runs. Powderhorn makes this request for several reasons. First, <br />Powderhom cannot possibly meet the May 14, 2001 deadline due to its status as a debtor in <br />possession under the bankruptcy laws, which create extremely difficult and time consuming <br />circumstances for obtaining a replacement bond. Obtaining a replacement bond -- even if <br />possible -- or other financial assurance, may require the approval of the bankruptcy court. In <br />addition, a hearing on NOV 2000-010 is scheduled before the Boazd at its May meeting. Due to <br />the duplicative nature of the allegations and relief requested, the NOVs should be heard <br />simultaneously. <br />The grant of this extension will not harm the state. The Powderhom mine has ceased <br />mining operations and is actively engaged in final reclamation. Furthermore, the Division has <br />not alleged a violation arising from Powderhom's own activities. Nor has there been a finding <br />by the Division or the Commissioner that Frontier is not capable of meeting its obligations under <br />the Bond, and the Bond remains in full force and effect. The fact that Frontier's Bond remains in <br />full force and effect is confirmed by [he Order of the Commissioner which states, "Respondent <br />[Frontier] shall also service any existing policies of insurance issued to persons residing in <br />Colorado." Order dated, March 14, 2001, by Commissioner of Insurance, William J. Kirven, III. <br />~avn.i <br />