Premiums, Commissions and Notes Receivable, Net

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Premiums, Commissions and Notes Receivable, Net

NOTE 6 – PREMIUMS, COMMISSIONS AND NOTES RECEIVABLE, NET

Premiums, commissions and notes receivable, net, are as follows:

	Year ended December 31
	2011	2010
Premiums and commission receivable	$3,439,653	$2,938,037
Premium finance notes receivable	2,977,731	2,536,877
Total premiums and notes receivable	6,417,384	5,474,914
Less allowance for doubtful accounts	(1,113,670)	(1,110,521)
Net premiums and notes receivable	$5,303,714	$4,364,393

Premiums and notes receivable are substantially secured by unearned premiums and funds held as security for performance. Premium finance notes receivable represent the balance due to the Company's premium finance subsidiary from policyholders who elected to finance their premiums over a nine-month term. These notes are net of unearned finance charges and credit loss reserves.

One of the Company’s agents that was appointed in 2008 to assist the Company to implement its Trucking Program, failed to pay the net premium and policy fees due Unifax, the exclusive general agent for Crusader. The agent was initially late in paying its February 2009 production that was due to Unifax on April 15, 2009. In May 2009, as a result of the agent’s failure to timely pay its balance due to Unifax, the Company terminated its agency agreement and assumed ownership and control of that agent’s policy expirations written with the Company. The agent has not paid any subsequent premium to Unifax. The Company subsequently commenced legal proceedings against the agent corporation, its principals (who personally guaranteed the agent’s obligations), and another individual for the recovery of the balance due and any related recovery costs incurred. All related recovery costs have been expensed as incurred. As of December 31, 2011, the agent’s balance due to Unifax was $1,495,226. Based on the information presently available, the Company has a bad debt reserve established of $1,101,835 which represents approximately 74% of the current balance due to Unifax. The Company’s bad debt reserve is subject to change as more information becomes available.

Bad debt expense for the year ended December 31, 2011, 2010 and 2009, was $11,465, $460,068 and $655,797, respectively.