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~- <br />KEN SALAZAR <br />Attomey General <br />CHRISTINE M. ARGUELLO <br />Chief Deputy Attomey General <br />ALAN J. GILBERT <br />Solicitor General <br />Robert D. Comer <br />Snell & Wilmer <br />1200 Seventeenth Street, Suite 1950 <br />Tabor Center <br />Denver, CO 80202 <br />April 17, 2001 <br />RE: Powderhom Coal Company -Frontier bond <br />Deaz Mr. Comer: <br />STATE SERVICES BUILDING <br />1525 Sherman Street - 5th Floor <br />Denver Colorado 80203 <br />Phone 303)866-4500 <br />FAX 303) 866-5691 <br />REC~OVED <br />APR 1 E 2001 <br />Division of Minerals and Geology <br />Bob Clark and I have received your Fifth and Sixth Fortnightly Reports. You make certain <br />statements in your reports that require our response and clarification. We have reviewed <br />Frontier Insurance Company's Reinsurance Agreement with National Indemnity Company and <br />find that it does not resolve our concerns about Frontier's ability to provide the financial <br />assurance required by Colorado regulation. The agreement does not provide the Division of <br />Minerals and Geology with any ability to pursue a cause of action against National Indemnity, <br />nor does it cleazly provide coverage of the bond for the Powderhom site. We have also received <br />further adverse information about Frontier's financial situation, which is discussed below. <br />In addition, although Frontier provided us with two actuarial opinions, one from Frontier's own <br />Vice President and Chief Actuary, Frontier has failed to provide us with the supporting <br />documentation and actuarial reports we have requested and Frontier agreed to provide. <br />However, such documentation and reports now appeaz moot in light of the Division's newest <br />notice of violation issued on April 13, 2001, based on recent information from, and actions by, <br />the Colorado Division of Insurance. <br />As you are awaze, the Division's Apri] 13 notice of violation is based on the fact that the <br />Colorado Division of Insurance has suspended Frontier's license to transact insurance business in <br />the State of Colorado. The Division of Insurance suspended Frontier's license on Mazch 14, <br />2001, based on its failure to file its 2000 annual statement and also because information about <br />Frontier's financial condition indicates that Frontier does not meet the financial requirements for <br />licensure. The Division of Insurance has advised that Frontier has waived its right to a hearing <br />on its suspension. Please see attached waiver. <br />.CF' OF COO <br />~e/~r~~~ <br />y <br />#~ <br />* X876 ~` <br />STATE OF COLORADO <br />DEPARTMENT OF LAW <br />OFFICE OF THE ATTORNEY GENERAL <br />Overall, then, Frontier and Powderhorn have not given the Division any basis on which the <br />outstanding NOVs can be resolved. Quite the contrary. The newest information on Frontier <br />