Ghost Town pays liability insurance bill after slide
Ghost Town in the Sky amusement park was behind on its general liability insurance payments in the months leading up to a massive landslide that originated from its property.
Ghost Town has been struggling with bankruptcy for the past year. It was three months behind on payments for its general liability insurance coverage when the slide occurred on Feb. 5, according to paperwork filed as part of bankruptcy proceedings.
Ghost Town had an arrangement with a finance company to make insurance payments on its behalf. In return, Ghost Town was supposed to make regular payments to the finance company, First Financial.
But Ghost Town got so late on payments that the finance company sent a “notice of cancelation” of coverage effective Jan. 28.
“Your insurance coverage referenced above is hereby cancelled as of the cancellation date indicated,” the notice states. The notice states that Ghost Town had “already received the statutory written notice of our intent to cancel and any cure period has expired.”
Another two weeks passed before Ghost Town sent a payment. On Feb. 10 — a few days following the landslide — Ghost Town wired $27,400 to the finance company to cover the past due bill from the last quarter of 2009 and the current quarter of 2010.
The status of Ghost Town’s account with First Funding for the liability insurance was found online. A payment of $13,000 was due in November of 2009. Three statements were sent out demanding payment over a three-month period.
The words “cancel status” then appear beside the account on Jan. 28. Account records show payments totaling $27,400 were wired on Feb. 10.
Lynn Sylvester, a Ghost Town partner and CPA, said the late payments to the finance company did not result in a lapse of insurance.
“Fact is, our insurance coverage did not lapse, and in fact, was always paid in full by the finance company, First Funding,” Sylvester said. However, First Funding filed paperwork with the bankruptcy court on Jan. 29 stating it had canceled the policy.
Representatives with the insurance company, First Mercury Insurance, would not say whether Ghost Town had general liability coverage at the time of the slide — which falls in the two-week window between the cancellation notice issued by First Funding on Jan. 28 and when the payments were wired on Feb. 10.
“That is between us and the insured,” said Bill Costello, a claims adjuster for First Mercury Insurance Company. Costello is handling a few other liability claims against Ghost Town, but said the company has not received any claims relating to the landslide that he is aware of.
Marcia Paulson, the vice president of administration with First Mercury Insurance in Southfield, Mich., also would not say whether Ghost Town’s insurance had lapsed during the window.
“I don’t know that I could address that. You are not the insured or the insured’s counsel,” Paulson said.
Ghost Town took out the general liability policy with First Mercury Insurance Company in May 2009 with an annual premium of $61,000, according to bankruptcy filings.
A company in bankruptcy reorganization is required to stay current on its insurance. The physical property of a bankrupt company is the only collateral for its debts. The property must be properly insured to protect the interests of those owed money.
BB&T, which is owed $9.5 million by Ghost Town for loans taken out to buy the property and fund upgrades, has the most at stake in bankruptcy proceedings. BB&T filed court papers on Feb. 3 objecting to Ghost Town falling behind in payments for its general liability policy. BB&T attached the notice of cancellation for the policy as an exhibit in the court filing.
Ghost Town had also received cancellation notices for its auto, property and fire insurance, which BB&T entered into the record as well.
BB&T is pushing for liquidation of Ghost Town’s property to pay off its debts rather than allowing it to continue operating under reorganization in the hope it can turn a profit and regain its footing.
The slide originated from Ghost Town’s property where a massive series of terraced retaining walls gave way. Geologists either haven’t determined or aren’t saying whether the slide was due to natural causes or was triggered by failure of the retaining wall.
Ghost Town hired a contractor to make repairs to the retaining wall when a portion collapsed in 2007. But some of the old railroad tie walls were left in place, resulting in a combination of new and old work. That in turn has led to finger pointing by Ghost Town CEO Steve Shiver and Carolina-A-Contracting of Maggie Valley, which did the work in 2007.