• Filing Date: 2014-03-12
  • Form Type: 10-K
  • Description: Annual report
v2.4.0.8
Commitments and Contingencies
12 Months Ended
Dec. 31, 2013
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 18 — Commitments and Contingencies

Lease Commitments

The Company currently leases 15,000 square feet of office space in Noida, India. The lease has an initial term of nine years commencing January 15, 2013 with monthly rental payments of approximately $10 plus applicable service tax for the first year. Thereafter the monthly rental payment will increase by five percent every year. The Company is entitled to terminate the lease 36 months after the commencement date by providing 3 months’ written notice to the landlord.

 

Provided the lease is not early terminated, minimum future rental payments under operating leases after December 31, 2013 are as follows:

 

Year

   Amount  

2014

   $ 114   

2015

     120   

2016

     126   

2017

     133   

2018

     139   

Thereafter

     461   
  

 

 

 

Total minimum future payments

   $ 1,093   
  

 

 

 

Rental expense under all facility leases was $248, $527 and $239, respectively, during the years ended December 31, 2013, 2012 and 2011. Expense in 2012 and 2011 include amounts related to the Company’s former corporate headquarters.

Service Agreement

In connection with the lease for new office space in India as described in the lease commitments above, the Company signed a long-term contract with the landlord to receive maintenance and facility services. The agreement has the same initial term of nine years with monthly payments of approximately $2 plus applicable service tax for the first year. Thereafter the monthly payment will increase by five percent every year. The Company is also entitled to terminate the agreement 36 months after the commencement date by providing 3 months’ written notice to the landlord.

Provided the agreement is not early terminated, minimum future payments under the service agreement after December 31, 2013 are as follows:

 

Year

   Amount  

2014

   $ 21   

2015

     21   

2016

     23   

2017

     24   

2018

     25   

Thereafter

     83   
  

 

 

 

Total minimum future payments

   $ 197   
  

 

 

 

Rental Income

The Company owns real estate that consists of 3.5 acres of land, a building with gross area of 122,000 square feet, and a four-level parking garage. This facility is used by the Company and its subsidiaries. In addition, the Company leases space to non-affiliates.

 

Expected annual rental income due under non-cancellable operating leases for all properties and other investments owned at December 31, 2013 are as follows:

 

Year

   Amount  

2014

   $ 894   

2015

     618   

2016

     307   

2017

     27   
  

 

 

 

Total

   $ 1,846   
  

 

 

 

Regulatory Assessments

a) Regular Insurance Assessments and Surcharges

As a direct premium writer in the state of Florida, the Company is subject to mandatory assessments by Citizens and the Florida Hurricane Catastrophe Fund (“FHCF”). These assessments are paid based on a percentage of the Company’s direct written premium by line of business. For the years ended December 31, 2013, 2012 and 2011, HCPCI paid assessments to FHCF amounting to $4,103, $2,517 and $1,592, respectively. Additionally, HCPCI paid assessments to Citizens of $3,156, $1,936 and $1,604, respectively, for the years ended December 31, 2013, 2012 and 2011. As of December 31, 2013, the Company’s other liabilities included $341 and $444 payable to Citizens and FHCF, respectively. These assessments are recorded as a surcharge in premium billings to insureds. As of December 31, 2013, 2012 and 2011, the surcharge rates in effect for FHCF and Citizens were 1.3% and 1.0%, respectively, for each of these years.

b) Guaranty Fund

The Florida Insurance Guaranty Association may assess the Company to provide for the payment of covered claims of insolvent insurance entities. The assessments are generally based on a percentage of premiums written as of the end of the prior year in which the assessment is levied. Although the Company is permitted by Florida statutes to recover the entire amount of assessments from existing and future policyholders through policy surcharges, liabilities are recognized when the assessments are probable to be imposed on the premiums on which they are expected to be based and the amounts can be reasonably estimated. During 2012, the Company paid $1,139 of guaranty fund assessments, $482 of which was recognized as an asset recoverable from policyholders. The balance of $657 was charged to expense in 2012. As approved by the Florida Office of Insurance Regulation, the Company had recovered a total of $1,030 during 2013, $434 of which was credited to the asset recoverable from policyholders. The amount recovered in excess of $434 reduced the Company’s 2013 policy acquisition and other underwriting expenses and was offset by a $48 expense for the amount unrecovered from policyholders. At December 31, 2013, the Company has no liability related to guaranty fund assessments.

 

Environmental Matters

In connection with the acquisition of one of the Company’s properties located in Pinellas County, Florida, the Company assumed the liability to complete a site assessment and remediation of environmental contamination that resulted from a petroleum release at the marina site in late 2009. At acquisition, the Company recorded a liability of $150 with respect to the planned remedial action. Such liability was determined based on reasonably estimable costs of completing the actions defined in the work plan. As of December 31, 2013, a total of $117 has been expended with respect to the site assessment and remediation and the remaining $33 accrued at acquisition is included in other liabilities in the accompanying consolidated balance sheets. Even with the Company’s best effort in estimating the costs, it is possible that additional testing and additional environmental monitoring and remediation will be required as part of the Company’s ongoing discussions with the Florida Department of Health, the agency contracted by the Florida Department of Environmental Protection to administer cases of petroleum contamination in Pinellas County, in which case additional expenses could exceed the current estimated liability. However, based on information known at December 31, 2013, the Company does not expect that such additional expenses would have a material, adverse effect on the liquidity or financial condition of the Company.

Premium Tax

In September 2013, the Company received a notice of intent to make audit adjustments from the Pittsburgh Service Center of the Florida Department of Revenue (“FDR”) in connection with the FDR’s audit of the Company’s premium tax returns for the three-year period ended December 31, 2012. The auditor’s proposed adjustments primarily relate to the disallowance of the entire amount of $1,754 in Florida salary credits applicable to that period. The proposed adjustment, which includes interest through September 10, 2013, approximates $1,913. Management has held discussions with the FDR staff and will continue working with the FDR to resolve this matter. The Company is confident in the merits of its position in claiming the Florida salary credits and intends to vigorously defend its position. As such, and based on the current status of and likelihood of final resolution, the Company has no amount accrued as of December 31, 2013 related to this contingency.

Litigation

The Company is party to claims and legal actions arising routinely in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material, adverse effect on the consolidated financial position or liquidity.